Payments News Update – December 6, 2024
Legal and Regulatory Developments
SPOTLIGHT: Musk Calls for End to CFPB
Banking Dive – November 27, 2024
Business mogul and presumed Trump Cabinet appointee Elon Musk called for the elimination of the Consumer Financial Protection Bureau, in a post Wednesday on social media platform X, which he owns.
“Delete CFPB. There are too many duplicative regulatory agencies,” Musk wrote.
The consumer watchdog, a product of the post-financial crisis Dodd-Frank Act, has long been the subject of Republican ire. Rep. Patrick McHenry, R-NC, ranking member on the House Financial Services Committee, told Director Rohit Chopra in December 2022 that under a Republican-majority Congress, “I think you’ll wish you tried harder to play by the rules.” . . .
CFPB Proposes Rule to Rein In Data Brokers’ Sale of Consumer Information
Payments Dive – December 3, 2024
The Consumer Financial Protection Bureau proposed a rule Tuesday to rein in data brokers trafficking in consumers’ personal data and unique account identifiers.
The rule is aimed at limiting the sale of that sensitive financial information, including Social Security numbers, income data and phone numbers, the agency said in a press release Tuesday.
That information is typically collected by credit bureaus for legitimate purposes, like reviewing a mortgage application, but all too often it’s being used for illicit activity, such as defrauding consumers, tracking military personnel and perpetrating domestic violence, CFPB Director Rohit Chopra said Monday. . . .
Retailers Argue for Higher Damages Bill in Swipe Fees Trial
Law360 – December 3, 2024 (subscription required)
Retailers suing Mastercard and Visa argued before the Court of Appeal on Tuesday that their damages bill from alleged unlawful overcharging by the card companies should incorporate continuing losses because the anticompetitive conduct has not yet stopped.
The group of retailers, which is suing Mastercard and Visa over multilateral interchange fees — paid by businesses to their acquiring lenders to accept payment by debit or credit card — told the appeals court that the proper law on damages in this kind of case is that losses continue to be calculated right up until the unlawful conduct ends. Mastercard and Visa’s unlawful conduct is still going on, the retailers argue.
The retailers are challenging a judgment by the Competition Appeal Tribunal, which found that some of their claims are time-barred under U.K. limitation laws. But the retailers say they are exempted from this by a European Union law known as the cessation requirement, which states that limitation periods for any competition claim cannot begin to run until the anticompetitive behavior comes to an end. . . .
Mastercard Reaches ‘Agreement In Principle’ to Settle Mass UK Fees Case
Reuters – December 3, 2024
Mastercard has reached an agreement in principle to settle a collective London lawsuit brought on behalf of British consumers over card fees, it said on Tuesday.
The global payments processor was facing a lawsuit brought by consumer champion Walter Merricks on behalf of approximately 46 million adults in the United Kingdom.
The case became the first mass consumer action to be approved in the UK in 2021 after a nearly five-year journey from the Competition Appeal Tribunal (CAT) to the UK Supreme Court and back. . . .
RI Judge Denies American Express’ Request to Drop Proposed Lawsuit
WPRI – December 2, 2024
A Rhode Island judge has rejected American Express’ request to strike down a proposed class-action lawsuit that accuses the banking giant of overcharging thousands of merchants for credit and debit card fees.
U.S. District Judge Mary McElroy determined that American Express — also known as Amex — must face the merchants as a class and not individually through arbitration. That class includes more than 5,150 merchants, with the lead merchant being Pawtucket’s 5-Star General Store.
The proposed lawsuit, filed back in March, claimed Amex owes the merchants more than $17,000 in arbitration fees. It also argued that binding arbitration clauses have made it difficult to resolve the merchants’ individual claims. . . .
What the CFPB’s Rules Mean for Open Banking
Digital Transactions Magazine – December 1, 2024
Open banking has long been viewed as the next big innovation in payments in the United States. The technology, well-established outside the country, enables consumers to securely share personal financial data across accounts with third parties, such as fintechs and banks. Third parties can then use the data to offer personalized products that are meant to be more relevant to consumers and that generate new revenue streams.
The technology’s promise is intriguing, but until recently there were no formalized rules in the United States governing the gathering of consumer data through open banking, how to secure that data, and how the data can be used. That changed in October when the Consumer Financial Protection Bureau unveiled its personal financial data-rights rule. Now enshrined as Section 1033 of the Consumer Financial Protection Act of 2010, the rule governs the sharing of consumer data through open banking.
The new rule requires financial institutions, credit card issuers, and other financial providers to share data—with a consumer ’s consent—through an application programming interface with third parties offering competing products. . . .
Has the CCCA Reached the End of the Road?
Digital Transactions News – November 26, 2024
With the odds against the Credit Card Competition Act coming to a vote before the current Congress adjourns growing by the day, the bill’s future appears bleak.
Prospects that the bill might advance received a major blow last week as Sen. Thom Tillis said during a Senate Judiciary Committee hearing about credit card swipe fees the bill “is not going to pass” in the current Congress.
Further casting doubt on the bill’s future is that, while a spokesperson for Sen. Richard Durbin, a co-sponsor of the bill, says by email the Illinois Senator “will continue to push for a vote on the Senate floor in the remaining time [before Congress adjourns]”, she was non-committal about whether Durbin or his co-sponsor, Sen. Roger Marshall, plans to reintroduce the proposal in the next Congress, which will be seated Jan. 3. . . .
Industry Developments
SPOTLIGHT: Visa to Boost Credit Card Fees Next Year
Payments Dive – November 25, 2024
Visa is expected to increase some fees it charges merchants and banks for credit card payments starting Jan. 1, according to a notice last month from the processor Global Payments.
That Oct. 10 notice says Visa’s “misuse” fee paid by merchants will jump by two-thirds to 15 cents, from 9 cents per transaction, while a base transmission fee paid by financial institutions will rise to a quarter of a cent from 18% of a penny. The misuse fee would be imposed if a transaction is authorized, but not settled within a certain timeframe.
Visa didn’t respond to a request for comment on the notice. A spokesperson for Global Payments didn’t immediately have a comment. . . .
As Cash Fades, Small Retailers Embrace Efforts to Rein In Swipe Fees
The New York Times – November 30, 2024 (subscription may be required)
Credit and debit card fees were always a big business expense for Patti Riordan, who owns a hobby shop in Lancaster, Ohio. But, she said, since the coronavirus pandemic, they’ve become a pain point.
As a pandemic precaution, droves of customers gave up cash in favor of contactless payment methods like tap to pay, and the percentage of Ms. Riordan’s sales processed through a card network rose to 75 percent, up from 65 percent in 2020. Now, so-called swipe fees are her third biggest expense, behind payroll and rent, amounting to roughly $18,000 a year.
“There is no room to pay more — we’re just operating so thin,” Ms. Riordan said. Debit and credit card fees are among the top monthly expenses for many small businesses, which say the costs are becoming more onerous as fewer consumers carry cash. Merchants of all sizes paid a total of $172 billion in processing fees in 2023, up from roughly $116 billion the year before the pandemic, according to the Nilson Report, which tracks the payments industry. That’s a 48 percent increase. . . .