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Payments News Update - July 14, 2023

Posted  July 14, 2023

Legal and Regulatory Developments

SPOTLIGHT: CFPB Takes Action Against Bank of America for Illegally Charging Junk Fees, Withholding Credit Card Rewards, and Opening Fake Accounts
CFPB – July 11, 2023

Today, the Consumer Financial Protection Bureau (CFPB) ordered Bank of America to pay more than $100 million to customers for systematically double-dipping on fees imposed on customers with insufficient funds in their account, withholding reward bonuses explicitly promised to credit card customers, and misappropriating sensitive personal information to open accounts without customer knowledge or authorization.

The Office of the Comptroller of the Currency (OCC) also found that the bank’s double-dipping on fees was illegal. Bank of America will pay a total of $90 million in penalties to the CFPB and $60 million in penalties to the OCC. . . .

New Jersey Legislature Passes Credit Card Surcharge Bill
Payments Dive – July 11, 2023

The New Jersey legislature has passed a bill limiting the surcharge merchants can impose on credit card payments to the amount they pay to process the transaction. The bill, backed mainly by Democrats, passed both houses of the legislature on June 30, according to the state’s legislative website.

The legislation prohibits a merchant in the state from imposing a surcharge that is more than “the actual cost to the seller to process the credit card payment,” according to a draft of the bill. It also requires merchants to disclose the surcharge before a transaction and to post a “clear and conspicuous sign” regarding the surcharge. . . .

27 States Tell Justices CFPB Funding Is Unconstitutional
Law360 – July 10, 2023 (subscription required)

Twenty-seven states asked the U.S. Supreme Court to affirm a finding in a case involving payday lending that the federal Consumer Financial Protection Bureau is funded in an unconstitutional manner.

The states said in a brief filed with the court Friday that because the bureau does not rely on direct appropriations from Congress, it can afford to “leave states out in the cold” when regulating banks and other financial entities. The novel funding approach allows the agency to ignore states’ concerns and their traditional oversight role, according to the brief. . . .

It’s Time for Congress to Dump the CCCA and Modify the Durbin Amendment, a Report Argues
Digital Transactions News – July 10, 2023

With proposals aimed at controlling merchants’ costs for accepting credit cards having re-emerged in Congress, research has been emerging on both sides of the issue this summer as advocates for sellers and card issuers compete to influence any eventual legislation.

The latest thrust appeared Monday with a research report arguing Congress should scrap the proposed Credit Card Competition Act and “significantly” raise the asset cap set out in the 12-year-old Durbin Amendment to the Dodd-Frank Act, which regulates debit card pricing. . . .

Banks’ Newest Fed Headache: Nonstop Instant Payments
Wall Street Journal – July 9, 2023 (subscription required)

The Federal Reserve expects to launch a new system this month aiming to make payments in the U.S. banking system available immediately, around the clock.

Although it is a boon to consumers and many businesses, some analysts warn that FedNow could destabilize banks’ reliance on customer cash, fanning the flames of deposit flight that became the bane of several regional banks this spring. . . .

US Payments Forum Resource Explores Impacts of Regulation II on Payments System Stakeholders
Global Newswire – July 5, 2023

Changes to Regulation II are now in effect, requiring debit card issuers to enable a minimum of two unaffiliated networks to process all debit card payments, including card not present (CNP) transactions.

Today the U.S. Payments Forum announces a new resource, published June 30th, 2023, that explores the technical and operational impacts of the July Reg II update on various industry stakeholders, including merchants, acquirers, processors, payment networks and issuers. . . .

Consumers Say Mastercard Fees Trickled Down as Trial Starts
Law360 – July 5, 2023 (subscription required)

“Unlawful” interchange fees Mastercard set across Europe influenced U.K. domestic rates, counsel for consumers bringing a £10 billion ($12.7 billion) class action against the card giant over swipe fees said at the start of an antitrust trial on Wednesday.

A lawyer for consumer champion Walter Merricks — who is bringing the claim on behalf of around 46 million adults in the U.K. — told the Competition Appeal Tribunal there was a “causal link” between the intra-European fees and the rates customers in Britain were charged. . . .

Industry Developments

SPOTLIGHT: Report: GTCR’s Worldpay Acquisition Is Largest Buyout Financing Since Twitter
PYMNTS – July 7, 2023

GTCR’s acquisition of Worldpay is reportedly set to be the largest buyout financing since last year’s Twitter deal.

Banks are preparing $9.4 billion of debt, including loans and bonds in dollars and euros, to back the private equity firm’s purchase of a 55% stake in the payment processor, Bloomberg reported Friday (July 7), citing unnamed sources. The package will include $8.4 billion of leveraged loans and high-yield bonds and a $1 billion revolving credit facility, according to the report. It is expected to be offered to institutional investors as early as September. . . .

60% Of Millennials Are Interested in BNPL Plans From Their Banks
PYMNTS – July 13, 2023

Buy now, pay later (BNPL) plans seem to be everywhere, but the greenfield opportunity remains relatively untapped.

In “Banking on Buy Now, Pay Later: Installment Payments and FIs’ Untapped Opportunity,” a PYMNTS and Amount collaboration, we found that 50 million consumers used BNPL through 2022. And the appeal of paying by installments, as relayed to us by more than 2,200 consumers, cuts across demographics and income levels. . . .

Car IQ Partners With Visa to Enable In-Car Payments
Digital Transactions – July 12, 2023

Car IQ Inc., a payment-platform provider for vehicles, has partnered with Visa Inc. to enable acceptance of its Car IQ Pay wallet for automobiles across the Visa network.

San Francisco-based Car IQ’s wallet can be used by fleet operators, car-sharing services such as Zipcar, and ride-sharing services such as Uber. Drivers can use the Car IQ wallet to pay for fuel, tolls, parking, insurance, services, and repairs without using a physical or virtual card. . . .

Goldman Sachs’ Foray Into Consumer Finance May Be Coming to an End
PaymentsJournal – July 7, 2023

In the midst of Goldman Sachs’ reevaluation of its consumer banking ventures—which have faced substantial criticism under the leadership of CEO David Solomon—the company is in discussions to transfer its Apple credit card and high-yield savings account products to American Express, according to CNBC.

If the move happens, it would signify a sudden and unexpected reversal for both Goldman Sachs and Apple. . . .

Stripping the Magnetic Stripe: What’s Taking So Long?
Bank Info Security – July 6, 2023

The world is moving on from magnetic stripe payment cards, with one notable exception: the United States. Credit card issuers, banks and consumers agree the magnetic stripe is prone to hacking – so why is one of the largest markets for plastic payment still clinging to decades-old technology?

Cards with the 60-year-old technology exist in the United States because replacing them is an expensive and tedious process – and it’s nobody’s particular responsibility to make that transition, said Marc Massar, senior adviser at Boston Consulting Group, who added that the U.S. market is one of only a handful of holdouts. . . .

Debit Plagued by Security Concerns: Survey
Payments Dive – July 5, 2023