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Good morning and welcome to Protocol Fintech. This Monday: Access to earned wages comes under fire, Capital One seeks fintechs and cell scams find simple explanation.

From the chain

For sale: a neobank, never used. American Challenger and Patriot National Bank called off their merger in the latest sign of trouble in neobanking. American Challenger is now offering its cost-saving technology and catchy brand name Cache.

– Owen Thomas (E-mail | chirp)

Quick money

Federal and state regulators are taking a closer look at how to regulate a fast-growing fintech space, access to earned wages. These products allow employees to receive their earned wages before their regular payday. As the industry has grown, so has the debate over whether the products should be considered credit extensions and regulated accordingly.

The Federal Office for Consumer Protection is dealing with the case. Hidden in a recent announcement to revoke a sandbox letter for EWA provider Payactiv was a warning that the agency would soon be “issuing further guidance.”

  • The cancellation of Payactiv’s sandbox brief, which gave the company regulatory protections from key lending rules, was at the company’s request. The company said it wants to make changes to its business strategy without prompting a lengthy CFPB review, although the CFPB had previously told Payactiv it was considering terminating the letter because the company “erroneously proposed a CFPB endorsement.” . ” A press release and a few to blog posts from Payactiv that link to the CFPB now return errors or redirect to the Payactiv home page.
  • Payactiv said it still pursues a “collaborative relationship” with the CFPB. The CFPB did not comment on its plans for further guidance.

Industry officials say earned wage products are a cheaper alternative to payday loans. Some employers even see faster payment options as a recruitment tool.

  • Contract products are growing fast. Research firm Aite-Novarica Group estimates that industry providers moved around $9.5 billion in wages in 2020. Although the company hasn’t released updated numbers, the number has since increased significantly, according to the company.
  • A November 2020 advisory opinion of the CFPB stated that employer-based programs to access earned wages do not qualify as a loan or credit unless the “employee makes payment, voluntarily or otherwise, to access EWA funds,” among other criteria. Before that, then-CFPB director Richard Cordray freed employer-based products for access to wages from a 2016 rule on payday loans.
  • consumer groups asked the CFPB for a review the 2020 Recommendation last fall, which said its definition of credit under the Truth in Lending Act could be used to justify classifying a wider range of EWA products as non-credit. The groups fear that fees could hurt users.

The states are also watching. Because early access to wages involves payment, state wage and hour laws could dictate what products are offered.

  • New Jersey, new York, South Carolina, Georgia, Utah, Nevada and North Carolina each thought about it regulatory framework for the products.
  • Some in the industry have offered support for the Californian approach. In February, the state Department of Financial Protection and Innovation issued a statement that employer-based EWA provider FlexWage is not subject to licensing under its lending and deferred deposit laws. The company applied for legal review.
  • The review set two standards to guide the labeling that the product is not a loan: Employers provided funds in amounts not exceeding wages earned but not paid, and the fees charged by FlexWage did not indicate that the product was intended to provide the to circumvent California credit laws. The regulator has also opened one rulemaking process for industry.

New regulations might not be a bad thing for the industry. “The main problem, no matter which side you’re on, is that there’s a lack of clarity,” said Moorari Shah, partner at law firm Sheppard Mullin. “Regulators, industry, employers all recognize it: it’s unclear how this is going to be addressed.”

– Ryan Deffenbaugh (E-mail | chirp) and Veronica Irwin (E-mail | chirp)

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On the money

Politicians can accept crypto again in California. The State Commission on Fair Political Practices voted unanimously in favor lift a ban on crypto donations and adopt new rules for accepting the funds.

On record: Sam Bankman-Fried comes up with a plan to save some of Voyager’s customers. But Voyager’s attorneys call it a “Low Ball Bid.”

Zipmex has resumed withdrawals. The crypto exchange canceled a withdrawal lock after about 48 hours, but still restricts deposits, transfers and trades.

Capital One goes fintech discount shopping. When asked about a possible fintech acquisition by analysts on the company’s earnings call, CEO Rich Fairbank said, “As prices have collapsed in this market, we continue to monitor the market carefully.” fintechs,” he said.

Investment bank Moelis & Co. has some crypto plans. Moelis is to found a group to focus on global blockchain deals.

Tesla recorded a $170 million impairment on its bitcoin holdings. The electric car maker also recorded $64 million in gains from certain sales of its Bitcoin holdings. said the company in its 10-Q filing with the SEC on Monday.

overheard

cell attracts scammers because of Willie Sutton Effect. “They’re drawn to these apps like moths to a flame simply because of the amount of money flowing through them and the speed of transfers,” Matt Schulz, Chief Credit Analyst at rental tree, said CNBC.

Come up

Visa and Fiserv are both in earnings talks on Tuesday. Visas eps The guidance is $1.74, up from $1.49 in the year-ago quarter. Fishv now has one eps Forecast $1.54 vs $1.37.

The Senate Committee on Banking, Housing and Urban Development will hold a hearing on discriminatory banking on Tuesday. That Listen is titled “Fairness in Financial Services: Racism and Discrimination in Banking” and will present witnesses from the Center for Responsible Lending and the Center for Equal Opportunity, as well as NYU Professor Jacob Faber.

Shopify also has an earnings call on Wednesday. LOAD eps The estimate has fallen to -$0.1 after reported earnings per share of $0.15 for the same quarter last year.

The Senate Banking Committee will also: a Listen on Crypto Scams and Other Risks Thursday. The Federal Trade Commission reported earlier this year that consumers lost over $1 billion between January 2021 and March 2022. And a CertiK report this month estimates that over $2 billion has been lost internationally due to fraud in DeFi and Web3 projects alone in 2022.

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Thanks for reading – see you tomorrow!