Weekly Fintech Focus

  • New York City bans cashless stores, joining Philadelphia, San Francisco, New Jersey, and Massachusetts in a growing national trend.
  • The FTC continues to go after payment processors involved in facilitating deceptive and fraudulent schemes.
  • FDIC extends the deadline for comments on its Innovation Pilot Program after it receives no responses.
  • FICO announces a recalculated FICO Score for credit scoring.

New York City Bans Cashless Stores

On January 23, 2020, the New York City Council approved legislation (Introduction No. 1281-2018-A) that amends the city’s administrative code to prohibit food and retail establishments from operating cashless establishments.  The bill also prohibits establishments from charging higher prices to cash-paying customers.  The prohibition on cashless practices would not apply to food or retail establishments that operate on-premises a machine that converts cash into a prepaid card, so long as that prepaid card can make unlimited purchases on any priced item at no additional cost to the consumer and does not require a minimum deposit over one dollar.  Food and retail establishments need not accept bills in denominations greater than $20.

The bill excludes transactions that take place entirely online, or by phone or mail.  The bill provides for penalties of $1,000 for the first violation and $1,500 for each succeeding violation. The law will take effect 270 days after signing by Mayor de Blasio.

New York City joins Philadelphia, PA; San Francisco, CA; West Hollywood, CA; New Jersey; and Massachusetts in passing legislation that prevents businesses from operating cashless retail outlets.

FTC Settles with Payment Processor that Enabled a Deceptive “Free Trial” Offer Scheme

The Federal Trade Commission (FTC) announced a settlement with a Latvian payment processor and its former CEO over allegations that they enabled a deceptive “free trial” offer scheme against U.S. consumers.  The order imposes a $3.5 million judgment against the defendants, bans the defendants from payment processing and assisting others in payment processing for certain categories of merchants, and it requires the defendants to conduct enhanced screening and monitoring procedures for the company’s high-risk merchants.  This settlement follows a prior settlement that forced the defendants to surrender assets valued between $3 million and $6 million.

As summarized by the FTC’s director of the Bureau of Consumer Protection, the payment processor helped scammers drain consumer’s accounts without permission.  As a warning to other payment processors, he emphasized that the “FTC will continue to aggressively pursue payment processors that are complicit in illegal conduct, whether they operate at home or abroad.”

The payment processor marketed “free trial” offers for personal care products and dietary supplements, but actually billed consumers the full price of and enrolled the consumers in negative option continuity plans without consent.  To further this scheme the payment processor used numerous shell companies and straw owners in the United States and abroad to engage in credit card laundering by obtaining merchant accounts to accept consumer card payments.

FDIC Extends Deadline for Comments on Innovation Pilot Program

The Federal Deposit Insurance Corporations has extended its deadline to receive comments on its innovation pilot programs to February 13, 2020. The innovation pilot program seeks engagement and collaboration with the financial, non-financial, and technology sectors to identify and develop technology-driven innovation among the community and other banks to ensure the safety and soundness of FDIC-supervised and insured institutions.

Comments may be submitted by email at comments@fdic.gov or by mail at:

Jennifer Jones
Federal Deposit Insurance Corporation
550 17th Street NW, Washington D.C. 20429
RE: Information Collection for Innovation Pilot Programs

FICO Announces New FICO Score 10 for Credit Scoring 

Fair Isaac Corp announced that its new FICO Score 10 will incorporate additional credit bureau data to further enhance predictive power.  Specifically, the new credit scoring model will include account balances for at least the previous 24 months.  Fair Isaac Corp estimates that roughly 110 million consumers will see a change to their credit score once the new model takes effect this summer, with roughly the same amount of people seeing their score increase or decrease.