Happy Sunday,

Price hikes continue to slow. The Fed could start cutting rates by March. Bitcoin ETF gets SEC nod (really). New York Gov. proposes BNPL law. FloatMe in trouble with the FTC. Montana AG says EWA isn’t a loan. Revolut faces potential class action. Arc launches venture debt marketplace. Credit unions weight RTP vs. FedNow. X plans P2P payments.

New here? Subscribe here to get our newsletter each Sunday. For even more updates, follow us on Linkedin (PeerIQ by Cross River).

Rate Cuts as Soon As March?

Analysts expect inflation to continue dropping in 2024. Price increases have continued to slow, with the cost of some goods, like automobiles, actually dropping, as supply conditions continue to improve. The data points are making investors hopeful that interest rate hikes are behind us, with some expecting the Fed to begin cutting rates as soon as its March rate-setting meeting.

Meanwhile, after a false start that saw the SEC’s X (formerly Twitter) account falsely post that a Bitcoin ETF had been approved after being taken over, the SEC actually approved a number of ETFs on Wednesday. All 11 applications for spot Bitcoin ETFs, including by ARK, Grayscale, Invesco, and Fidelity, were approved. The move is being hailed as a “game changer” by many in the crypto world, as it makes owning crypto much more easily accessible to the tens of millions of Americans with a typical brokerage account.

Image: Bloomberg

NY AG to Propose BNPL Law

New York is the latest U.S. state to move towards regulating popular buy now, pay later plans. New York’s governor, Kathy Hochul, has signaled she plans to introduce legislation that would require BNPL providers to be licensed in the state. The bill, if passed, would also empower the state financial regulators, the NYDFS, to issue rules for the industry. While specifics haven’t yet been released, regulatory measures are likely to include disclosure requirements, credit reporting standards, and dispute resolution practices, experts said. California has required BNPL providers to be licensed under the state’s California Financing Law since 2020, which defines BNPL plans as “loans” under said law. The OCC also recently weighed in, issuing guidelines for the national banks that it oversees. The CFPB has frequently commented on risks related to BNPL, including that the plans should carry protections on par with credit cards. But the consumer regulator hasn’t yet released specific regulations governing BNPL.

FloatMe Latest Cash Advance App in Trouble

FloatMe, a cash advance app, reached a stipulated judgment with the FTC over allegations the company deceived customers, unfairly discriminated against users who had income from public assistance, and charged users without their consent. It’s the second case the FTC has recently pursued in the category, with FloatMe-competitor Brigit reaching an $18Mn settlement with the FTC late last year over similar allegations.

In FloatMe’s case, the FTC alleges the company marketed “Floats,” its term for cash advances, of up to $50, but in no circumstances could first time users qualify for that amount. The agency further alleges that FloatMe purported to have an “automated” process to raise users’ limit if they qualified, but no such automated process existed. FloatMe advertised “no hidden fees,” but charged as much as $4 for instant transfers, the FTC said. And the app didn’t consider income from gig work, tips, pensions, military benefits, or public assistance, according to the FTC.

The agreement with the FTC prohibits FloatMe from further deceptive or illegal practices and requires the company to pay a $3Mn penalty. FloatMe told Fintech Business Weekly that the company disagreed with the claims and admitted no wrongdoing, but “settled to avoid the ongoing expense and distraction of litigation.”

Montana Clarifies EWA Isn’t A Loan

Late last year, Montana’s attorney general clarified that earned wage access products, if they meet certain criteria, are not considered “consumer loans” or “deferred deposit loans” under the relevant existing state legislation. In order to avoid classification as a loan under Montana law, EWA products must be non-recourse, must not condition access on the payment of mandatory interest, fees, or other compensation, and a consumer cannot receive an advance in excess of their accrued income. The AG’s opinion clarifies that “tips,” if they are voluntary and not required to receive an advance, are permissible. The opinion also states that certain ancillary charges, as long as they are not required to be eligible for the advance, are also permissible.

Revolut Faces Proposed Class Action on Biometric ID

Neobank Revolut is facing a potential class action suit in Illinois over its collection and use of biometric data. A user in the state filed a civil suit against the company, arguing it does not disclose how users’ biometric data is collected, used, stored, and destroyed, and that it does not properly collect “written” consent. The case argues this is a violation of Illinois’ Biometric Information Privacy Act. The plaintiff in the case is seeking a judgment that Revolut’s practices violate the law, a requirement that Revolut cease practices that violate the law, and damages.

Arc Launches Venture Debt Marketplace

Arc, a fintech in the cash and treasury management space, launched its venture debt marketplace last week. The offering, dubbed Arc Capital Markets, looks to help fill the gap left when Silicon Valley Bank melted down last spring, touching off a regional banking crisis. Arc’s offering looks to connect clients of its cash management platform with a group of pre-vetted venture debt providers. Arc is also looking to streamline and automate the process by using AI to extract data from startups’ various systems to underwrite the companies and generate its proprietary “Arc Score.” Venture debt can be an attractive option for some startups that are looking to lengthen their runway without enduring the dilution that comes with raising additional equity capital.

Credit Unions Weigh RTP vs. FedNow

There’s a common misperception that RTP, operated by The Clearing House, is for big banks, while FedNow is the preferred faster payments rail for small banks and credit unions. But plenty of credit unions are busting that assumption. FedNow, which launched last July, has signed up about 50 credit unions to date. RTP has signed up 111 credit unions, though it has been in market longer than FedNow. Corporate One FCU, which supports consumer credit unions, helped 18 CUs onboard to RTP last year, and expects to facilitate another 20 getting on either RTP or FedNow this year.

X Plans Peer-to-Peer Payments This Year

X, formerly Twitter, is taking one step toward Musk’s vision of it becoming an “everything” app. The company plans to launch P2P payments sometime this year, Musk announced in a blog post last week. X has a ways to go, though, on launching the feature. As of now, the company holds money transmission licenses in just 14 U.S. states. While Musk brings experience from his PayPal days, the market has changed considerably since then. Venmo, Cash App, and Zelle have emerged has the dominant forces in peer-to-peer payments. Others that have tried to introduce similar capabilities have failed to breakout. While X benefits from an established user base in the hundreds of millions, it remains to be seen if Musk can convince users to trust X with their money.

In the News:

California law targeting small-business loan fees takes effect (American Banker, 1/8/2024) A new law bans small-business lenders from charging certain kinds of “predatory” fees.

The CFPB sharpens its focus on servicers as student loan repayments return (Tearsheet, 1/9/2024)

Financial Technology Association Tells CFPB to Slow Down on Payments Rule Proposal (Crowdfund Insider, 1/8/2024) The FTA critiqued the bureau’s proposal to oversee “larger participants” in digital payments in a recently filed comment letter.

Where have all the bankers (in Congress) gone? (American Banker, 1/8/2024) Facing retirements, there are a dwindling number in Congress with first-hand experience in banking.

94% of Consumers Who Use Overdrafts for $400-Plus Expenses Face Financial Hardships (PYMNTS, 1/9/2024) Households that use overdrafts are more likely to be in financial distress, survey data shows.

Can banks benefit from the DOJ’s pressure on Apple Pay? (American Banker, 1/10/2024) A possible DOJ antitrust suit against Apple could be good news for banks.

The Fed Launched a Bank Rescue Program Last Year. Now, Banks Are Gaming It. (Wall Street Journal, 1/10/2024) Banks are using the emergency Bank Term Funding Program, not because of financial stress, but because the rates are better.

Treasure Financial lays off staff just months after reporting ‘explosive growth’ (Techcrunch, 1/10/2024) The treasury management startup laid off 14 employees.

Lighter Fare:

Is there a 9th planet out there? We may soon find out (National Geographic, 1/9/2024) A new observatory may soon answer the question.