Patchwork of state laws leads to higher costs, less access
A growing patchwork of state laws and regulations in key financial and consumer protection areas is imposing undue burdens on credit unions and other businesses across state lines. It’s also resulting in higher consumer costs and less robust markets nationwide. America’s Credit Unions Head of Regulatory Advocacy James Akin outlined laws of concern Monday in a letter to the Department of Justice, which issued a request for information on laws impeding commerce.
“Congress should enact uniform national standards that preempt conflicting state laws across four domains: payment-card interchange and routing, consumer data and biometric privacy, artificial intelligence, and elder financial exploitation,” the letter reads.
Laws that raise concern include:
- The Illinois Interchange Fee Prohibition Act (IFPA), which prohibits collection of interchange fees on portions of transactions representing state or local taxes or gratuities. The bill would “upend the nationally integrated card payments system,” burden national commerce, and pre-empt federal laws governing nationally chartered financial institutions. The Illinois Credit Union League successfully advocated for a one-year delay to the IFPA;
- State fair lending and algorithmic bias laws that aim to regulate the use of AI and other underwriting processes in ways that burden businesses and conflict with federal law. This includes Colorado’s AI law, New York’s recent prohibition on the use of immigration status in underwriting, and state-level Community Reinvestment Act regimes in states including Illinois and Massachusetts;
- Consumer data privacy laws and biometric privacy laws. The letter notes that California, Texas, Maryland, and Minnesota have recently passed laws to this effect, “each adding their own twist on privacy rights and requirements,” that require national providers to build state-by-state workflows or default to the strictest rule;
- Elder financial abuse reporting and protection laws that are inconsistent with reporting and intervention requirements. Protecting seniors from financial exploitation is a priority for all credit unions, but inconsistencies create burdens for institutions looking to meet all requirements; and
- AI-specific regulations that could have sweeping effects on interstate commerce. For example, California and Utah have AI regulation laws that would create mandates that essentially create a de facto national standard as developers work to stay in compliance.
America’s Credit Unions stands ready to work with all relevant federal agencies and Congress to craft solution to alleviate undue regulatory burdens on small businesses and consumers while still achieving the important public interest goals behind these laws.
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