US FinTech Policy in the 116th Congress January 2019 — June 2019 Curated by Jackson Mueller, Associate Director, FinTech Program, Milken Institute Center for Financial Markets 1 June 2019 in Review: Notable Congressional Developments . Credit Access and Inclusion Act resurfaces. The legislation was recently introduced by Sen. Tim Scott (R-SC) in mid-June and would essentially allow for landlords, telecom companies, and utility providers to report on-time payments data to credit bureaus in an effort to boost consumer credit scores. This is not the first time we’ve seen this bill introduced in the House and Senate. As we noted in a prior white paper,1 the legislation appeared in both the 114th and 115th Congresses, with former Representative Keith Ellison (D-MN) leading the charge. Despite the broad bipartisan support for prior versions of this Act, the legislation has yet to make it out of Congress and onto the president’s desk. Keep in mind that Sen. Scott also introduced a similar version in the 115th Congress (S.3040),2 which found its way into the JOBS and Investor Confidence Act. The legislation passed the House in July 2018, but never made it out of the Senate. Lastly, the US House Financial Services Committee Task Force on FinTech will convene for a public hearing on July 26 covering the use of alternative data in underwriting and credit scoring to expand access to credit. FinTech & AI Task Forces hold inaugural hearings. Announced by House Financial Services Committee Chairwoman Maxine Waters (D-CA) back in May, the Task Force on FinTech and the Task Force on AI held their inaugural hearings in late June. A lot of topics were raised during each hearing, which we highlighted in a recent LinkedIn post.3 The Task Force on FinTech has scheduled another hearing for late July focused on the use of alternative data in underwriting and credit scoring. Export-Import Bank reauthorization debate now includes FinTech. The United States Export Finance Agency Act of 2019 was introduced in late June with support from both the chair and ranking member of the House Financial Services Committee. Tucked away in Section 103, Program on China and Transformational Exports, are provisions that seek to boost the comparative leadership of the United States with respect to China, or support U.S. innovation through direct exports in several areas including, artificial intelligence, wireless communications equipment, quantum computing, and "emerging financial technologies". In early June, the House Financial Services Committee held a hearing on the Bank’s reauthorization. In his opening remarks, Ranking Member Patrick McHenry (R-NC) had this to say: "The use of EXIM as a tool of our national interests and even our national security interests has increased importance today. China is providing unparalleled levels of export subsidies for its companies, especially its state-owned enterprises, with the goal of dominating the technologies of tomorrow and extending its influence through the 'Belt and Road' initiative. In the face of this challenge, no one expects the Export-Import Bank to singlehandedly neutralize China's efforts. But as we continue to examine how to modernize EXIM, it's imperative that we look reality in the eye and adapt the bank to the present day. This means focusing EXIM on the exports of the future. It means supporting jobs that are central to the culture of competitiveness and innovation. This is how EXIM can best advance US leadership in the face of China's plans." 1 Jackson Mueller, Bipartisan Opportunities to Legislate U.S. FinTech in the 21st Century. Milken Institute. March 2018. Available at: https://assets1c.milkeninstitute.org/assets/Publication/Viewpoint/PDF/FINAL-FinTech-Bipartisan-Legislation2.pdf 2 Scott Applauds House for Passing Legislation to Increase Access to Credit and Opportunity. U.S. Senator Tim Scott (R-SC). Available at: https://www.scott.senate.gov/media- center/press-releases/scott-applauds-house-for-passing-legislation-to-increase-access-to-credit-and-opportunity 3 Jackson Mueller, FinTech Task Forces Hold Inaugural Hearings - Recap & Initial Reactions. June 28, 2019. Available at: https://www.linkedin.com/pulse/fintech-task-forces-hold- inaugural-hearings-recap-mueller-iv/ 2 . Taxpayer First Act becomes law. It has taken quite a bit of time to get to this point, but in mid-June Congress passed a bill that would, among other provisions, require the IRS to implement a fully automated program for disclosing taxpayer information for third-party income verification using the internet. As we profiled in our bipartisan FinTech policy whitepaper, similar bills were introduced in the two previous congresses. Those bills, however, never made it to the president’s desk despite support from lawmakers on both sides of the aisle. As we stated previously: “A direct, digital connection between the IRS and FinTech firms could ensure near real-time delivery, authorization, and verification, providing small business borrowers with quicker access to credit at reduced cost to the borrower due to a much more efficient, expedient process. Legislative efforts to upgrade certain agency reporting processes to the digital era should be supported.” . Libra (and Facebook) in Focus. Quite the blowback from policymakers and regulators after Facebook unveiled the Libra white paper in mid- June. In a recent release of FinTech in Focus, my colleague, Dan Murphy, provided his initial thoughts on the project.4 On Capitol Hill, House Financial Services Committee Chairwoman Maxine Waters (D-CA) raised initial concerns before calling on Facebook and its partners to "immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action." David Marcus, Head of Calibra at Facebook, attempted to address several of the concerns raised by policymakers in a post on Facebook and in a letter to Chairwoman Waters and top members of the House Financial Services Committee. Nevertheless, consumer groups in the U.S. continue to urge lawmakers to impose a moratorium on Facebook’s recent effort. Both the Senate Banking Committee and House Financial Services Committee will hold hearings this week to discuss Facebook’s latest initiative. 4 Dan Murphy, Calibrating a Currency. FinTech in Focus. Milken Institute. Available at: https://www.milkeninstitute.org/articles/fintech-focus-june-19-2019 3 June 2019 in Review: FinTech-related Legislation Introduced HOUSE . H.R.3151, Taxpayer First Act . H.R.3374, LGBTQ Business Equal Credit Enforcement and Investment Act . H.R.3403, Searchable Legislation Act of 2019 . H.R.3407, United States Export Finance Agency Act of 2019 . H.R.3490, Small Business Lending Fairness Act SENATE . S.1790, National Defense Authorization Act for Fiscal Year 2020 . S.1828, Credit Access and Inclusion Act . S.1883, Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2019 . S.1951, Designing Accounting Safeguards to Help Broaden Oversight And Regulations on Data (DASHBOARD) Act . S.1961, Small Business Lending Fairness Act 4 June 2019 in Review: FinTech-related Legislation on the Move H.R.3151, Taxpayer First Act . Passed House (6/10/19; Voice Vote); . Passed Senate (6/13/2019; Voice Vote); . Signed into Law (7/2/2019; Public Law No. 116-25) Requires the IRS to implement a fully automated program for disclosing taxpayer information for third-party income verification using the internet. S.1790, the National Defense Authorization Act for Fiscal Year 2020 . Passed Senate (6/27/19; Vote: 86-9) Requires the Director of National Intelligence, in consultation with the Secretary of the Treasury, to submit a report to Congress on the possible exploitation of virtual currencies by terrorist actors. 5 116th Congress: FinTech-related Legislation January 2019 – June 2019 6 Breakdown of US FinTech-related Legislation Legislative Category No. bills No. bills Total No. of Bills Total No. of Bipartisan Percent Bipartisan introduced introduced (through June 2019) Bills (through June (%) (House) (Senate) 2019) Artificial Intelligence 2 1 3 1 33% Blockchain 3 1 4 3 75% Credit Reporting - 1 1 1 100% Cryptocurrency 6 4 10 9 90% Digital Tokens 2 - 2 2 100% Data Privacy/Protection 1 9 10 4 40% Innovation Office 1 - 1 1 100% Lending 7 8 15 7 47% Payments 2 - 2 - 0% Priv/Sec/Off: Accredited - 1 1 - 0% Investor Priv/Sec/Off: EGC - 2 2 2 100% RegTech 4 - 4 3 75% VC/Angel: General 1 1 2 2 100% Solicitation/Road Shows/Test the Waters/Resale VC/Angel: Qualifying VC 1 - 1 1 100% Fund/Venture Exchange Total 30 28 58 36 62% Source: Milken Institute Center for Financial Markets 7 FinTech-related Legislation (% of Total)* Priv/Sec/Off: Accredited Investor, 2% VC/Angel: Qualifying VC Innovation Office, 2% Fund/Venture Exchange, 2% VC/Angel: General Credit Reporting, 2% Solicitation/Road Shows/Test the Waters/Resale, 3% Priv/Sec/Off: EGC, 3% Payments, 3% Lending, 26% Digital Tokens, 3% Artificial Intelligence, 5% RegTech, 7% Cryptocurrency, 17% Blockchain, 7% Data Privacy/Protection, 17% *Percentages rounded to the Source: Milken Institute Center for Financial Markets nearest whole number 8 By the Numbers: FinTech-related Bills Per Legislative Category 16 15 . 58 FinTech-related bills introduced 14 since January 2019 12 . House: 30 bills introduced 10 10 10 . Senate: 28 bills introduced 8 No. of Bills 6 4 4 4 3 2 2 2 2 2 1 1 1 1 0 Source: Milken Institute Center for Financial Markets FinTech-related Legislative Category 9 Share of Bipartisan Bills to Total US FinTech-related Bills By the Numbers: 16 . 58 FinTech-related bills 14 introduced since January 12 2019 7 10 . 36 FinTech-related bills 8 4 (~62%) are bipartisan No. of Bills 6 9 . Lending: 47% of bills are 4 8 6 bipartisan 3 3 1 2 2 2 2 2 2 0 1 1 1 1 1 1 1 .