Money Transmission Act: authentication.

Plain English Breakdown

The bill does not require state reimbursement for local agencies and school districts as per the California Constitution.

Money Transmission Act: Authentication and Protection

The Money Transmission Act requires stored value platform operators to protect customers from fraud and use strong login methods.

What This Bill Does

• Requires stored value platform operators to reimburse customers for losses caused by fraudulent transfers starting in 2028.
• Allows customers to submit claims through digital communication like mobile apps.
• Prohibits digital wallet providers and money transmitters from allowing users to log in without two-factor or multi-factor authentication.

Who It Names or Affects

• Stored value platform operators
• Digital wallet providers
• Money transmitters operating in California

Terms To Know

stored value

Monetary value stored on an electronic or digital medium that can be used to pay for goods and services.

two-factor authentication

A security process requiring two different methods of verification from independent categories of credentials to gain access to a system.

Limits and Unknowns

• The bill does not specify the exact penalties for non-compliance.
• It is unclear how much it will cost companies to implement these new requirements.

Official Summary Text

SB 505, as amended, Richardson.
Money Transmission Act:
stored value platforms: fraudulently induced transfers.
authentication.
The Money Transmission Act (MTA) prohibits a person from engaging in the business of money transmission in the state, or from advertising, soliciting, or holding itself out as providing money transmission in the state, unless the person is licensed by the Department of Financial Protection and Innovation under the act. The MTA defines “money transmission” to mean, among other things, selling or issuing stored value to a person located in the state and defines “stored value” to mean monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services. The MTA punishes noncompliance with, among other things, a civil penalty, license revocation, and, for certain violations, as a
felony, as prescribed.
This bill would
require,
prohibit, beginning January 1, 2028,
under the act,
an operator of a stored value platform to reimburse a customer for any loss directly caused by a fraudulently induced transfer, as prescribed, and would require an operator of a stored value platform to establish means by which a customer can submit a claim for reimbursement that allow for the customer to communicate a claim through, among other methods, digital communication via the mobile application through which a customer is able to initiate a transfer of stored value on the stored value platform.
a digital
wallet provider or money transmitter operating in the state from allowing a user to log in without using two-factor authentication or multifactor authentication for any login by that user.
By expanding the scope of a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

Current Bill Text

Download Bill PDF