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FPPC debates new rules for online payment processors and prepaid cards; commissioners ask for more outreach
Summary
Staff proposed regulations to require verification by payment processors (address verification, IP checks) and to limit use of prepaid debit/gift cards for contributions and committee expenditures over $100; commissioners and stakeholders asked staff to pause and solicit vendor, treasurer and enforcement feedback before final rules.
Regulators at the Fair Political Practices Commission on Aug. 21 discussed a proposed regulatory package aimed at tightening verification for online campaign contributions and restricting the use of certain prepaid cards for campaign contributions and expenditures.
Senior Commission Counsel Zachary Norton said enforcement investigators found cases where multiple online contributions tied to one card indicated weak verification by contract vendors. Norton recommended verification steps such as address verification service (AVS) checks and examination of IP addresses to flag potential foreign or prohibited sources, while acknowledging limits created by VPNs.
The proposals for contributions would require third-party processors to implement reasonable verification measures, and staff suggested banning supermarket-style prepaid gift cards and prepaid debit cards from being used to make contributions. On expenditures, the draft rule would treat cash-like supermarket prepaid cards as equivalent to cash and prohibit handing out such cards with values of $100 or more to staff or volunteers because of recordkeeping and single bank-account concerns.
Pushback and technical nuance: Attorneys and professional treasurers cautioned against a broad ban. The California Political Attorneys Association and the California Political Treasurers Association said some prepaid expense platforms (marketed as PECS/PEX cards) provide detailed, downloadable transaction records and can be configured to restrict merchant types (for example, gas only). Patricia Marr of a professional treasury firm and Nick Sanders of a political law firm asked the commission to distinguish between PECS-style expense platforms and supermarket-style gift cards in any regulation.
Commissioner response and next steps: Commissioners expressed concern about disclosure and enforcement gaps but repeatedly asked staff to solicit further input from treasurers, vendors, enforcement investigators and the Secretary of State before adopting a firm prohibition. Several commissioners (including Brandt and Wilson) emphasized that the core standard should be record availability and treasurer access to transaction data; others warned about the timing of regulatory change so close to an election cycle.
No final action was taken. Staff was directed to gather more information from vendors and the regulated community and to consult enforcement investigators on the practical recordkeeping and audit implications before returning with refined language.
