Payments News Update – June 21, 2024
Legal and Regulatory Developments
SPOTLIGHT: Visa Settles Discover Unit’s Antitrust Lawsuit Over Debit Card Network
Reuters – June 14, 2024
Discover Financial Services unit Pulse Network has agreed to settle a lawsuit in Texas accusing Visa of obstructing competition in the multibillion-dollar debit card network services market, causing merchants to pay higher fees.
Pulse and Visa disclosed the accord in a court filing on Friday in federal court in Houston, where Pulse had sued the payment card giant in 2014. Pulse said it was dismissing its case with “prejudice,” meaning that it cannot be refiled.
The court filing, signed by both sides, did not reveal the terms of the settlement. . . .
Senate Republicans Join Battle Against Fed Debit Card Plan
Payments Dive – June 20, 2024
A group of Republican U.S. Senators earlier this week joined House members in a campaign to “pause” the Federal Reserve’s plan to lower a cap on fees that bank card issuers can charge merchants on consumer debit transactions.
Senators Ted Budd (R-NC), Thom Tillis (R-NC), Steve Daines (R-MT), Bill Hagerty (R-TN) and Katie Britt (R-AL) cosponsored the bill on Tuesday, pointing in a press release to negative repercussions for consumers since the initial cap was introduced in 2011.
The bill calls on the Federal Reserve to conduct a “quantitative impact analysis” of the rule proposal and submit a report to Congress before finalizing the edict. The analysis must assess the impact on consumers’ access to free or low-cost deposit accounts; costs for merchants that accept debit cards; and expenses for banks that issue cards in seeking to mitigate fraud. . . .
Mastercard Settles Merchant Group Action in Interchange Fee Litigation
The Global Legal Post – June 19, 2024
Global financial services provider Mastercard is understood to have settled a class action brought against it by more than 1,900 businesses as part of the ongoing interchange fee litigation.
The Global Legal Post has learned that settlement was agreed in the past week between Mastercard, represented by Jones Day, and the merchant claimants, represented by Stephenson Harwood.
In terms of the number of claimants involved, it is the most significant settlement to date in the ongoing litigation relating to alleged overcharging of credit and debit card fees from 1992 onwards. . . .
Apple to Settle ‘Tap-and-Go’ Payments Probe With EU
Financial Times – June 18, 2024 (subscription may be required)
Apple is to conclude a long-running EU antitrust investigation into its mobile payments system and avoid a huge fine by making a series of concessions to allow rivals greater access to its contactless technology system.
The European Commission, the executive arm of the EU, charged the iPhone-maker in 2022 with breaking competition law. Brussels regulators had argued the tech company was preventing competitors from accessing “tap-and-go” chips or near-field communication (NFC) to benefit its own Apple Pay system.
But three people familiar with the matter said that regulators had accepted a number of measures that Apple had committed to in January this year. . . .
The Fight Over Credit Card Swipe Fees Hits the Road
Politico – June 18, 2024
Banks and credit card companies are contending with new threats to swipe fees that have popped up in statehouses across the U.S.
Earlier this month, Illinois Gov. J.B. Pritzker signed a state budget that eliminated interchange fees on the sales tax and tipped portions of transactions.
New legislation that was fast-tracked through the Pennsylvania House Finance Committee last week would nix interchange fees — charges that merchants pay to issuing banks and payment networks when customers use credit cards to make purchases — on sales and use taxes. Similar legislation has been introduced in more than a dozen other states, according to the lawmakers behind the Pennsylvania bill. . . .
CFPB House Hearing: 6 Key Takeaways
Payments Dive – June 18, 2024
Consumer Financial Protection Bureau Director Rohit Chopra answered questions from members of the House Financial Services Committee during a four-hour hearing last Thursday.
The U.S. House of Representatives is controlled by Republicans, and the committee is chaired by Republican Congress member Patrick McHenry (R-NC). The hearing, titled “The Semi-Annual Report of the Bureau of Consumer Financial Protection,” ranged in tone from heated back-and-forth exchanges with Republicans, to praise and support from Democrats.
Chopra’s testimony last week followed the CFPB fending off an existential challenge to its existence last month when the Supreme Court upheld the bureau’s funding structure by a 7-2 vote. . . .
Australia Will Launch ‘Holistic’ Payments Review Under New Remit
Bloomberg – June 17, 2024 (subscription may be required)
Australia’s central bank is working with the government to modernize the country’s regulatory framework for retail payments, following which it will launch a “holistic review” of the sector, a senior official said.
“There are many interesting policy issues to explore, including the cost and transparency of payment services and how we can promote competition that benefits end users,” Ellis Connolly, head of payments policy at the Reserve Bank, said in a speech in Melbourne on Tuesday.
The reforms will allow the RBA to regulate “newer players” including payment gateways, payment facilitators, digital wallet providers and buy now, pay later services, Connolly added. . . .
A Fight Over an Illinois Interchange Prohibition Law Is Far From Over
Digital Transactions News – June 17, 2024
Groups representing Illinois financial institutions, along with the Electronic Payments Association, say they will fight to overturn the Illinois Interchange Fee Prohibition Act, which was passed earlier this month and is set to go into effect July 1 next year.
Opponents of the bill are continuing an ad campaign to educate Illinois residents and small businesses about what the groups say are the complications the law will create.
Passed as part of a larger bill at the tail end of Illinois Spring legislative session, the Interchange Fee Prohibition Act exempts merchants in the state from paying interchange on sales tax. In exchange, the law caps what merchants are paid by the state for collecting sales tax at $1,000 per month. As a result, Illinois merchants will pay interchange only on the pre-tax amount of a purchase. . . .
Judge Likely to Reject $30 Billion Visa, Mastercard Fee Deal [Updated]
Bloomberg Law – June 14, 2024 (subscription may be required)
A $30 billion settlement between Visa Inc., Mastercard Inc. and retailers to cap credit-card swipe fees is likely to be rejected by a federal judge in Brooklyn, a setback in the two decade-long litigation.
US District Judge Margo Brodie in Brooklyn, New York said at a hearing Thursday that she probably won’t approve the deal, according to a transcript of the hearing. Brodie hasn’t officially ruled, but said she would “issue a written decision” in coming days, according to a summary of her comments in court on Thursday.
“My inclination is, and this is how I had started drafting the opinion, is not to accept the settlement,” Brodie said. “I don’t know what an adequate settlement would be but I do know that I’m troubled by this one, and nothing that I’ve heard today has changed my mind that, in fact, this settlement should be approved.”. . .
Industry Developments
SPOTLIGHT: Reversing a Credit-Card Charge Has Never Been Easier—or More Abused
The Wall Street Journal – June 19, 2024 (subscription may be required)
Malolan Vasu felt duped when a $750 wingback chair he ordered turned out not to be as antique as advertised when he went to pick it up. The seller had a no-refund policy, but Vasu had a surefire way to get his money back.
With a few clicks and even fewer questions asked, Vasu disputed the charge to his Capital One credit card—a power move millions of shoppers are relying upon to win retail arguments.
So swift and effective was the process that the 22-year-old financial analyst said disputing charges has become his go-to way to settle grievances large and small. A few weeks later, he filed his second dispute, this time over a $3 tip that was tacked onto a bar tab without his permission. . . .
Apple Stops Offering Buy Now, Pay Later Loans in U.S.
CNBC – June 17, 2024
Apple said on Monday that it has stopped issuing loans through Apple Pay Later, its buy-now-pay-later program that launched last year.
The move comes after Apple said it would start allowing installment loans later this year in its Apple Pay checkout process through third-party companies, such as Affirm, and credit and debit cards from issuers, such as Citigroup.
Apple said it would no longer issue Apple Pay Later loans, which enabled customers to buy products online and pay in four interest-free installments, at prices up to $1,000. The discontinuation is a sign that not every new fintech feature or product that Apple launches becomes a success or fits in with the iPhone maker’s overall strategy. . . .
Apple Gives Banks a Bigger Bite of Its Payment Features
The Wall Street Journal – June 15, 2024 (subscription may be required)
Apple is sometimes called a disrupter to banks. But relationships in financial technology are much more complicated than that.
Announcements out of the tech company’s latest product showcase included enhancements to Apple Pay, the digital wallet whose size and stature has rapidly expanded in recent years. They included a feature that will enable banks to offer buy now, pay later installment payments via their cards loaded into users’ Apple Pay wallets. In the U.S., Citigroup, Synchrony Financial and Apple Pay issuers using Fiserv, a software provider to many banks, will be part of the initial rollout, Apple said. . . .
Apple also is introducing the ability to pay for a purchase with card rewards, adding that much more value to those points, and giving banks another opportunity to win a transaction. . . .