Category: Payment Systems

1
Senate Committee publishes report and recommendations on regulation of Australian buy now pay later industry
2
California Regulator Seeking Comments on “Agent of the Payee” Exemption to Money Transmission Law
3
Crypto founder’s death elevates taking a secret to the grave to the next level
4
Australian Gift Cards – Additional Consumer Protections
5
The Rise of PayWear
6
Australian Council of Financial Regulators consults on changes to Stored-Value Facilities Regulation
7
South Carolina Is the Latest State to Implement Money Transmitter Licensing Laws and Regulations
8
Surprise: New York State Court Ruling Means That NY Payroll Card Regulations Could Go into Effect After All
9
RBA: accessibility, security and resilience are key to the future of retail payment systems in Australia
10
Vermont Signals Broad Interpretation of Money Transmitter Law

Senate Committee publishes report and recommendations on regulation of Australian buy now pay later industry

Jim Bulling and Felix Charlesworth

Following on from the Senate Hearings in January 2019, the Economic References Committee (Committee) published its Report on credit and financial services targeted at Australians at risk of financial hardship.

In addressing the current regulation of the buy now pay later (BNPL) industry, the Committee raised its concerns about the ease of accessibility of BNPL services to consumers experiencing financial hardship. Despite BNPL businesses, such as AfterPay and Zip.co stating that they already had algorithms in place to detect whether it was appropriate to provide services to an individual, the Committee stated that “clearly more needs to be done to ensure consumers are protected, and company algorithms alone are not sufficient.”

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California Regulator Seeking Comments on “Agent of the Payee” Exemption to Money Transmission Law

By Jeremy M McLaughlin

Several states exempt from their money transmission law, either through statute or regulatory guidance, an “agent of the payee.”  California is one such state.  In general, the exemption applies to a party that a payee has appointed as its agent for purposes of receiving payment from a payor.  The Department of Business Oversight (“DBO”), the agency that enforces California’s money transmitter law, has invited comments on a proposed rule making regarding the scope of the exemption.  Comments are due by April 9, 2019.

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Crypto founder’s death elevates taking a secret to the grave to the next level

By Cameron Abbott and Ella Richards

In an age where cyber security breaches are a near daily occurrence, and where we’re frequently reminded to keep our passwords secret and safe, the story that’s emerged regarding the fate of over AU$190 million of crypto-currency following the death of Gerald Cotten, the founder of Quadriga CX, is a little ironic to say the least.

The untimely death of the 30-year-old in December brought with it an unexpected sober reality – Mr Cotten was the only person with access to Quadriga’s coin reserve. No really … the ONLY person… you can see where this is going can’t you?

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Australian Gift Cards – Additional Consumer Protections

By Jim Bulling, Edwin Tan and Elise Hamblin

Every year, Australian consumers suffer an estimated loss of $70 million through gift cards expiring before use. On 18 October 2018, the Treasury Laws Amendment (Gift Cards) Act 2018 (Gift Card Act) was passed in an effort to reduce this loss.  Fintech card issuers should be aware of the upcoming changes and start making preparations to ensure that they continue to be compliant with the regulatory requirements.

What will change?

The Gift Card Act amends the Australian Consumer Law to create a national regime where:

  • gift cards must have a minimum expiry period of three years;
  • expiry information on gift cards must be prominently displayed; and
  • the charging of fees (except certain prescribed fees) after a gift card has been supplied will be prohibited.

We expect that the amendments will not apply to reloadable cards.

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The Rise of PayWear

By Jim Bulling and Elise Hamblin

Contactless payment technology has expanded beyond traditional credit or debit cards to include smart watches and phones that are fitted with “Near Field Communication” technology. Westpac is now the first major bank in Australia to embrace “PayWear” as the next development in this space.

What is “PayWear”?

PayWear allows a consumer to make payments by tapping a “Smart” accessory to a contactless payment terminal. For example, Westpac’s “Centsitive Objects” range has reimagined the traditional Debit Mastercard as an accessory. Other smaller banks have also recently introduced PayWear options for consumers, including Heritage Bank’s wearable wrist band and Bankwest’s payment ring.

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Australian Council of Financial Regulators consults on changes to Stored-Value Facilities Regulation

By Jim Bulling, Felix Charlesworth and Edwin Tan

The Australian Council of Financial Regulators (CFR) today published an Issues Paper reviewing the regulatory regime of stored-value facilities including purchased payment facilities (PPFs).  The CFR comprises regulators such as APRA, ASIC and the RBA.

PPFs enable funds to be stored for the purpose of making future payments and include mobile wallet services and prepaid cards.  PPF providers must be licensed and supervised by APRA or otherwise rely on an exemption from complying with the legislative requirements.  The RBA has declared several class exemptions for PPFs, including the “limited-value facilities” exemption for PPFs with payment obligations of $10 million or under.

To date, PayPal is the only entity licensed and supervised by APRA as a PPF provider and only one entity has obtained individual exemption from the RBA.  These results support arguments that the current framework is too complicated, deters potential new entrants and imposes significant compliance costs.

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South Carolina Is the Latest State to Implement Money Transmitter Licensing Laws and Regulations

By Eric A. Love and Judith E. Rinearson

On May 25, 2018, South Carolina’s money transmitter licensing law, the South Carolina Anti-Money Laundering Act, and its implementing regulations (collectively, the “Act”) became effective.

This means that the newly established Money Services Division (the “Division”) within the SC Attorney General’s Office is now accepting applications for licensure to engage in money transmission and currency exchange in that state.  Entities that were engaging in such activities in South Carolina as of May 25 had until June 29, 2018 to submit an application.  After submission, such entities were able to continue operating while their applications were being reviewed.

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Surprise: New York State Court Ruling Means That NY Payroll Card Regulations Could Go into Effect After All

By Judith Rinearson and Eric A. Love

The years-long endeavor in New York State to extensively regulate payroll cards (referred to in the NY regulations as “payroll debit cards”) recently entered a new phase when the New York State Supreme Court, Albany County, annulled the New York State Industrial Board of Appeals’ (“IBA”) February 2017 decision to revoke new payroll card regulations that had previously been issued in that state.  This means that, depending on the outcome of the recently filed appeal of the court’s decision, the controversial and highly restrictive NY payroll card regulations could become effective after all.

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RBA: accessibility, security and resilience are key to the future of retail payment systems in Australia

By Jim Bulling and Felix Charlesworth

The Assistant Governor of the Reserve Bank of Australia (RBA), Michele Bullock, delivered a speech at the Bund Fintech Summit in Shanghai on the developments in the retail payments industry and the potential implications these pose for regulators.

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Vermont Signals Broad Interpretation of Money Transmitter Law

By Jennifer Crowder and Jeremy McLaughlin

Recently, largely due to emerging payment systems and new ways of conducting business online, there has been a trend developing among states that certain activity does not require money transmitter licensing.  For example, several states have amended their statutes or issued regulatory guidance to indicate that a license is not needed if an entity is acting as an “agent of the payee” or as a “payment processor,” so long as certain conditions are met.  In general, an agent of the payee is an entity that has a contractual relationship with the merchant or other ultimate payee such that payment to that entity constitutes, in effect, final payment.  New York, for example, describes it as “any person authorized by a payee to receive funds on behalf of the payee and to deliver such funds received from the payor to the payee.”  N.Y. Comp. Codes R. & Regs. tit. 3, § 406.2(l).

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