May 12, 2021
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Vendor * Spotlight
PPP Exhausted

Funding for the Paycheck Protection Program has been depleted, according to a statement from the U.S. Small Business Administration.
"After more than a year of operation and serving more than eight million small businesses, funding for the bi-partisan Paycheck Protection Program has been exhausted," the SBA said in the statement.
Banks are still waiting for the tens of millions of dollars in income from fees earned from participating in the PPP, executives said during recent first-quarter earnings calls.
Banks continue to provide lending under the program, but differing loan forgiveness policies from bank to bank means fee recognition for some institutions may fall into the latter quarters of 2021 and even into 2022.
Source: S&P Global Market Intelligence
IRS reporting proposal would “impose costs and complexity”

ICBA voiced its opposition to an Administration proposal, which would impose new bank IRS reporting requirements on customer bank accounts, in a joint letter to the Senate Finance Committee.
President Joe Biden’s $1.8 trillion American Families Plan proposes that financial institutions report to the IRS on bank account flows of customers related to investments and business activity, according to statements from the White House and Treasury Department.
Community banks already conduct substantial reporting. Any new reporting requirements would impose cost and complexity without a justifiable benefit. ICBA called for a cost-benefit analysis before adopting new requirements, which could carry privacy and fairness implications for accountholders.
2.3Source: ICBA
Proposed changes to interchange regs

The Federal Reserve Board invited public comment on proposed changes to Regulation II (Debit Card Interchange Fees and Routing).
The changes would clarify that debit card issuers should enable, and allow merchants to choose from, at least two unaffiliated networks for card-not-present debit card transactions, such as online purchases.
The Fed said two unaffiliated networks are often not available to process card-not-present debit card transactions because some issuers do not enable them, which prevents merchants from having a choice between competing networks when routing such transactions.
The Fed also issued its latest biennial interchange report, which found that U.S. payment card networks in 2019 processed 79.2 billion debit and general-use prepaid card transactions valued at $3.1 trillion. Total transaction volume grew 7 percent in 2019, in line with the 7.8 percent average annual growth rate from 2009 to 2018.

Source: Federal Reserve
Support for ‘true lender’ rule

Financial industry groups told Congress they oppose legislative efforts to repeal the OCC’s “true lender” rule.
Following a similar ICBA statement to Congress, the groups said the OCC rule brings clarity and accountability to lending and promotes wider access to credit. Repealing it would create significant legal impediments to creating this needed framework, they said.
The OCC rule creates a standard to determine when a bank is the “true lender” when partnering with a third party. Under the rule, banks are deemed true lenders if they fund the loan or are named as the lender in the loan agreement on the origination date.
House and Senate lawmakers have introduced resolutions to repeal the rule under the Congressional Review Act, which allows lawmakers to invalidate federal rules and limits agencies’ ability to issue a similar rule in the future. Proponents argue the rule undercuts state consumer protection laws.
Source: ICBA
Western Union to test banking products

Money transfer giant The Western Union Co. is set to test banking products like debit or credit cards for its customers in the third quarter, Bloomberg News reported, citing a Bloomberg Television interview with Western Union CFO Raj Agrawal. The Denver-based financial services company is also considering creating a marketplace where consumers can shop, Agrawal told the news outlet.
Source: S&P Global Market Intelligence; Bloomberg
Postal banking gains momentum

With Democrats in control of Congress and the White House, the concept of postal banking appears to be gaining traction.

Sen. Sherrod Brown, D-Ohio, a long-time proponent of postal banking, is leading the Senate Banking Committee. Top Democratic leaders are calling for a postal banking pilot program and have previously introduced bills to establish postal banking. Sen. Kirsten Gillibrand, D-N.Y., and others suggested Congress include $6 million in its appropriations bill to pilot a nonprofit banking operation run out of postal offices.

Postal banking advocates argue that leveraging the U.S. Postal Service's more than 34,000 locations to offer low-cost, basic banking services like checking accounts and low-interest loans is the best way to reach low income and underbanked consumers. It's a form of public banking that has been successful in several countries, including Japan, Germany, France and China. But opponents of postal banking believe it would create an unfair competitive environment for community banks, pitting them against a government entity with a virtually unlimited budget.

Some critics dismiss the need for postal banking, arguing the banking business is best left to the private sector.

"We have banks. The idea that the government is going to do a better job is just laughable," said Patrick Toomey, R-Pa., Senate Finance Committee ranking member.

With a razor-thin margin in the Senate, Democrats in favor of postal banking are facing an uphill battle, noted Isaac Boltansky, director of policy research at Compass Point Research & Trading LLC. "The odds are still heavily against postal banking being enacted any time in the near future."

The primary goal of a postal bank would be to serve unbanked and underbanked Americans. An FDIC survey in 2019 found that 5.4% of Americans were unbanked. Even more people are underbanked, meaning they have some access to financial services but still used high-cost products such as small-dollar loans from payday lenders.

Source: S&P Global Market Intelligence