8 ms·

Instead of warning consumers, why not do what regulators do and, well, regulate? Here, you have entities storing unsecured funds and doing god knows what with i

Instead of warning consumers, why not do what regulators do and, well, regulate? Here, you have entities storing unsecured funds and doing god knows what with it. In the interest of the public good, a just government and a conscientious regulatory body wouldn't busy itself warning anyone. Rather, they would be bringing down the hammer on these entities and making them an example of what happens to companies that try to destabilize the financial system.

deleted 3y ago
[deleted]
nerdponx 3y ago
Maybe the problem is that they do not have jurisdiction to regulate these organizations, so the best they can do is issue warnings. That or it's regulatory capture. Hard to say without knowing the details of relevant legislation and case law.
- kevin_thibedeau 3y ago
  They really should force US Paypal to become a bank. Clearly that is workable for their European operations.
  - chmod775 3y ago
    PayPal is already a bank in Europe, so it should be workable indeed.
    - thephyber 3y ago
      "it should be workable" sounds suspiciously hand-wavy and sounds particularly naïve about law. EU and countries in the EU bloc are governed by completely different laws than the US (and the constituent states). This particular regulator (CFPB) is considered illegitimate by most Republicans (the bureau leadership has more independence from the Executive Branch than they would like) and is still fighting decade-long court cases to continue to exist. It's not clear how much actual authority this bureau has to force companies to do anything.
      - dataflow 3y ago
        For anyone curious: https://www.npr.org/2023/02/27/1159748990/supreme-court-cfpb https://www.npr.org/2023/02/27/1159748990/supreme-court-cfpb Decisions will likely come out in 2024.
  - pharrington 3y ago
    IANAL, but I am quite sure that is not how our country works. The closest legal possibility to what you're talking about is the government buying PayPal and turning it into a bank, but that's not happening anytime in the foreseeable future.
LapsangGuzzler 3y ago
> a just government and a conscientious regulatory body wouldn't busy itself warning anyone. Regulatory bodies issue warnings all the time, that's one of the most essential functions of a government. Why? Because we don't like it when the government unilaterally acts on our behalf. Warning people is also the cheapest option here, which matters in a society that is constantly obsessed with government spending. There are tons of bank-adjacent services out there (pay-day loans are just one example) and it would cost a fortune in legal fees to force everyone that holds cash for customers to register as a bank. This way, consumers know the risks and businesses don't need to take on excessive regulatory burden. How is that a government failure?
- katbyte 3y ago
  > How is that a government failure because the people with money there will call it that when they finally loose money, no matter how many warnings are issued.
- ouid 3y ago
  [flagged]
  - dang 3y ago
    We've banned this account for breaking the site guidelines and ignoring our many requests to stop. https://news.ycombinator.com/item?id=34820507 https://news.ycombinator.com/item?id=34820507 (Feb 2023) https://news.ycombinator.com/item?id=33266501 https://news.ycombinator.com/item?id=33266501 (Oct 2022) https://news.ycombinator.com/item?id=33266456 https://news.ycombinator.com/item?id=33266456 (Oct 2022) https://news.ycombinator.com/item?id=22630570 https://news.ycombinator.com/item?id=22630570 (March 2020) https://news.ycombinator.com/item?id=18774144 https://news.ycombinator.com/item?id=18774144 (Dec 2018) https://news.ycombinator.com/item?id=18743106 https://news.ycombinator.com/item?id=18743106 (Dec 2018) If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future. They're here: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
- 3y ago
lost_tourist 3y ago
We really have enough federal regulation on money to be honest. Just get your money out of venmo/cash app and put it into your bank account and there will be no worries.
- Mistletoe 3y ago
  This is such a bizarre take to have in 2023 when we just had the 3 of the top 4 bank failures of all time. Yes they were fully backstopped by the FDIC (even though they shouldn't have been) because they were the first out the door. The FDIC can't back them all. https://www.bankrate.com/banking/largest-bank-failures/ https://www.bankrate.com/banking/largest-bank-failures/
xg15 3y ago
Fun fact: PayPal's EU branch is in fact a bank: https://www.telegraph.co.uk/finance/markets/2808982/PayPal-becomes-a-bank-to-fight-off-Google.html https://www.telegraph.co.uk/finance/markets/2808982/PayPal-b...
babyshake 3y ago
At least require the apps to all have an option to automatically withdraw any funds sent to the balance, at least within excess of some marginal amount. Let them leave the option disabled by default, but at least it gives us a reasonable way of not needing to constantly remember to withdraw funds. One additional benefit is it would put some pressure on the apps to offer practical incentives for users to maintain a balance instead of using the automatic withdraw option.
- cam_l 3y ago
  PayPal does this already, no? or is this another weird US only thing.
kmoser 3y ago
> Here, you have entities storing unsecured funds and doing god knows what with it. Your first mistake is assuming that when you transfer, say, USD $500 into your Paypal (or Venmo or...) account, your Paypal account now holds USD $500. Rather, you are effectively exchanging USD $500 for Paypal bucks. When you transfer your Paypal bucks back out to a bank account, you are effectively purchasing fiat currency with your Paypal bucks. That Paypal shows your balance in USD (or whatever currency you use) is misleading; it's similar to a mutual fund balance which shows the current value of your shares in USD. You don't actually own USD $500; you own 500 Paypal bucks which have a current theoretical value of USD $500, and are thus not subject to banking regulations. I'm not saying this is good, or that it should be this way, but rather that's effectively how it works. Now, can somebody tell me why banking regulations don't apply to my airline miles? After all, I've earned them and they are theoretically worth USD, so shouldn't they be protected?
- toast0 3y ago
  > Now, can somebody tell me why banking regulations don't apply to my airline miles? After all, I've earned them and they are theoretically worth USD, so shouldn't they be protected? Are airline miles theoretically worth USD? Afaik, they exchange for flights on a X points = Y class flight basis, not on a dollar basis. Yes, you can usually buy more miles for USD, but price to buy isn't price to sell.
  - butlerm 3y ago
    FDIC member banks are subject to regular and special assessments by law to pay for deposit insurance up to the legal limit for their depositors. Much like insurance premiums. I do not imagine that your airline pays for airline mile insurance on your behalf to anyone.
    - toast0 3y ago
      Sure, because they can devalue the miles. Welcome to our newest mileage program where now you need 2x the miles to get anything good.
- 3y ago
shri_krishna 3y ago
It is really easy to tackle this problem. Do what the RBI (Reserve Bank of India) did and create a policy whereby PayPal has to payout funds to customers attached bank account in 1 day. RBI banned PayPal from holding funds. And not just PayPal but Stripe and every payment processor out there (unless you are using a MOR then this rule currently does not apply). Since implementation of this rule, PayPal and Stripe are forced payout funds every day for all funds collected from customers throughout the day. They cannot hold any funds. Once payout is initiated, it may take 3-5 working days for the funds to be realized in the account (which I blame SWIFT for being so damn slow).
retube 3y ago
What do you mean, "bring down the hammer" ?

deleted 3y ago

[deleted]

nerdponx 3y ago

Maybe the problem is that they do not have jurisdiction to regulate these organizations, so the best they can do is issue warnings. That or it's regulatory capture. Hard to say without knowing the details of relevant legislation and case law.

kevin_thibedeau 3y ago
They really should force US Paypal to become a bank. Clearly that is workable for their European operations.
- chmod775 3y ago
  PayPal is already a bank in Europe, so it should be workable indeed.
  - thephyber 3y ago
    "it should be workable" sounds suspiciously hand-wavy and sounds particularly naïve about law. EU and countries in the EU bloc are governed by completely different laws than the US (and the constituent states). This particular regulator (CFPB) is considered illegitimate by most Republicans (the bureau leadership has more independence from the Executive Branch than they would like) and is still fighting decade-long court cases to continue to exist. It's not clear how much actual authority this bureau has to force companies to do anything.
    - dataflow 3y ago
      For anyone curious: https://www.npr.org/2023/02/27/1159748990/supreme-court-cfpb https://www.npr.org/2023/02/27/1159748990/supreme-court-cfpb Decisions will likely come out in 2024.
- pharrington 3y ago
  IANAL, but I am quite sure that is not how our country works. The closest legal possibility to what you're talking about is the government buying PayPal and turning it into a bank, but that's not happening anytime in the foreseeable future.

LapsangGuzzler 3y ago

> a just government and a conscientious regulatory body wouldn't busy itself warning anyone. Regulatory bodies issue warnings all the time, that's one of the most essential functions of a government. Why? Because we don't like it when the government unilaterally acts on our behalf. Warning people is also the cheapest option here, which matters in a society that is constantly obsessed with government spending. There are tons of bank-adjacent services out there (pay-day loans are just one example) and it would cost a fortune in legal fees to force everyone that holds cash for customers to register as a bank. This way, consumers know the risks and businesses don't need to take on excessive regulatory burden. How is that a government failure?

katbyte 3y ago
> How is that a government failure because the people with money there will call it that when they finally loose money, no matter how many warnings are issued.
ouid 3y ago
[flagged]
- dang 3y ago
  We've banned this account for breaking the site guidelines and ignoring our many requests to stop. https://news.ycombinator.com/item?id=34820507 https://news.ycombinator.com/item?id=34820507 (Feb 2023) https://news.ycombinator.com/item?id=33266501 https://news.ycombinator.com/item?id=33266501 (Oct 2022) https://news.ycombinator.com/item?id=33266456 https://news.ycombinator.com/item?id=33266456 (Oct 2022) https://news.ycombinator.com/item?id=22630570 https://news.ycombinator.com/item?id=22630570 (March 2020) https://news.ycombinator.com/item?id=18774144 https://news.ycombinator.com/item?id=18774144 (Dec 2018) https://news.ycombinator.com/item?id=18743106 https://news.ycombinator.com/item?id=18743106 (Dec 2018) If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future. They're here: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
3y ago

lost_tourist 3y ago

We really have enough federal regulation on money to be honest. Just get your money out of venmo/cash app and put it into your bank account and there will be no worries.

Mistletoe 3y ago
This is such a bizarre take to have in 2023 when we just had the 3 of the top 4 bank failures of all time. Yes they were fully backstopped by the FDIC (even though they shouldn't have been) because they were the first out the door. The FDIC can't back them all. https://www.bankrate.com/banking/largest-bank-failures/ https://www.bankrate.com/banking/largest-bank-failures/

xg15 3y ago

Fun fact: PayPal's EU branch is in fact a bank: https://www.telegraph.co.uk/finance/markets/2808982/PayPal-becomes-a-bank-to-fight-off-Google.html https://www.telegraph.co.uk/finance/markets/2808982/PayPal-b...

babyshake 3y ago

At least require the apps to all have an option to automatically withdraw any funds sent to the balance, at least within excess of some marginal amount. Let them leave the option disabled by default, but at least it gives us a reasonable way of not needing to constantly remember to withdraw funds. One additional benefit is it would put some pressure on the apps to offer practical incentives for users to maintain a balance instead of using the automatic withdraw option.

cam_l 3y ago
PayPal does this already, no? or is this another weird US only thing.

kmoser 3y ago

> Here, you have entities storing unsecured funds and doing god knows what with it. Your first mistake is assuming that when you transfer, say, USD $500 into your Paypal (or Venmo or...) account, your Paypal account now holds USD $500. Rather, you are effectively exchanging USD $500 for Paypal bucks. When you transfer your Paypal bucks back out to a bank account, you are effectively purchasing fiat currency with your Paypal bucks. That Paypal shows your balance in USD (or whatever currency you use) is misleading; it's similar to a mutual fund balance which shows the current value of your shares in USD. You don't actually own USD $500; you own 500 Paypal bucks which have a current theoretical value of USD $500, and are thus not subject to banking regulations. I'm not saying this is good, or that it should be this way, but rather that's effectively how it works. Now, can somebody tell me why banking regulations don't apply to my airline miles? After all, I've earned them and they are theoretically worth USD, so shouldn't they be protected?

toast0 3y ago
> Now, can somebody tell me why banking regulations don't apply to my airline miles? After all, I've earned them and they are theoretically worth USD, so shouldn't they be protected? Are airline miles theoretically worth USD? Afaik, they exchange for flights on a X points = Y class flight basis, not on a dollar basis. Yes, you can usually buy more miles for USD, but price to buy isn't price to sell.
- butlerm 3y ago
  FDIC member banks are subject to regular and special assessments by law to pay for deposit insurance up to the legal limit for their depositors. Much like insurance premiums. I do not imagine that your airline pays for airline mile insurance on your behalf to anyone.
  - toast0 3y ago
    Sure, because they can devalue the miles. Welcome to our newest mileage program where now you need 2x the miles to get anything good.
3y ago

shri_krishna 3y ago

It is really easy to tackle this problem. Do what the RBI (Reserve Bank of India) did and create a policy whereby PayPal has to payout funds to customers attached bank account in 1 day. RBI banned PayPal from holding funds. And not just PayPal but Stripe and every payment processor out there (unless you are using a MOR then this rule currently does not apply). Since implementation of this rule, PayPal and Stripe are forced payout funds every day for all funds collected from customers throughout the day. They cannot hold any funds. Once payout is initiated, it may take 3-5 working days for the funds to be realized in the account (which I blame SWIFT for being so damn slow).

retube 3y ago

What do you mean, "bring down the hammer" ?