Payments News Update – March 8, 2024
Legal and Regulatory Developments
SPOTLIGHT: Taking the Measure of Click to Cancel
Digital Transactions Magazine – March 1, 2024
Faced with a proposal to make it easier to stop a subscription, payments companies and subscription specialists have much to ponder. Everyone dreads the inevitable sales pitch that comes when trying to cancel some subscriptions. There’s multiple pages to read online and the search to find the diminutive cancel button. Or there’s the phone call that requires you to decline multiple pitches so you can stay on the line to confirm a subscription cancellation.
While not every company offering a subscription-payment service makes it difficult to end a recurring payment, enough do that the industry may be faced with a mandated easy-to-use option to cancel a subscription. It’s the Federal Trade Commission’s so-called click-to-cancel button. Announced a year ago, the proposal, which is part of the commission’s review of its 1973 Negative Option Rule, would require companies to make it as easy to cancel a subscription as it is to enroll in one. . . .
CFPB Adopts Rule to Slash Credit Card Late Fees By Billions
Law360 – March 5, 2024 (subscription required)
The Consumer Financial Protection Bureau said Tuesday that it has finalized a new rule to sharply lower the typical credit card late fee from more than $30 down to just $8, a move that could save consumers billions of dollars annually and is expected to face a swift industry challenge in court. The rule, which hews closely to a CFPB proposal from a year ago, focuses on a more-than-decade-old regulatory safe harbor that acts as a de facto cap on credit card late fees. This safe harbor defines fee amounts below which a bank is presumed compliant with a 2009 statutory ban on excessive card fees. . . .
Tuesday’s final rule slashes these safe harbor amounts to a flat $8 and ends their inflation-indexing, just as the agency proposed last year. Unlike that original plan, however, the final rule has been scaled back slightly to apply just to larger card issuers, or those with at least 1 million open accounts. . . .
BankThink – BNPL Products Are Not Credit Cards. They Require Tailored Regulations.
American Banker – March 1, 2024 (subscription required)
As the head of policy at Klarna, I’ve watched closely as the landscape of consumer finance undergoes a profound transformation. Credit cards, long revered for their convenience and the potential to build credit history, are increasingly revealing a darker side: significant financial risks, especially for the substantial portion of Americans who carry a balance and end up paying revolving interest.
New research has found that nearly half of American credit card users carry a balance from month to month . . . . Meanwhile, the buy now/pay later industry, projected to reach a valuation of over $744 billion with over 900 million users by 2027, is rapidly emerging as a preferred payment choice for consumers around the world. BNPL’s allure is in its offer of 0% interest credit. . . . The call for regulation in the BNPL sphere in the U.S. among regulators and lawmakers is loud and clear, and rightly so. . . .
Industry Developments
SPOTLIGHT: JPMorgan Joins France’s Payments Network CB to Skirt Visa, Mastercard
Reuters – March 5, 2024
JPMorgan Chase & Co said on Tuesday it had joined France’s leading payments network Cartes Bancaires (CB), becoming the first U.S. bank to do so as it seeks to offer cheaper card payment costs to its clients in the country.
JPMorgan’s merchant customers, which include some of the largest U.S. firms, will be able to process their payment via the CB’s network by the end of 2024, JPMorgan added, offering a domestic alternative to rival services provided by Visa and Mastercard. By doing so, the U.S. bank aims to “provide competitive transaction costs” to its clients, it said, without elaborating. . . .
How Apple Is Juicing Payments
Digital Transactions Magazine – March 1, 2024
The iPhone maker is known for its impeccable technology. What is less obvious is its nuanced but multipronged assault on the payments business. Ask anyone on the street what Apple Inc. does, and such is the company’s fame that even the least technology-inclined will respond immediately with examples like the Mac computer, the iPhone, or, lately, the VisionPro virtual-reality headset. Some may cite Apple Pay or even tap-to-pay on iPhone. But few will think of the consumer-tech Goliath as a payments company.
Until now. “Definitely, they’re a fintech company at this point,” says Sheridan Trent, director of market intelligence at TSG, an Omaha, Neb.-based payments research firm. “Are they a payments company? They’re definitely trending in that direction.” Surprised? Long-time Apple watchers aren’t. The company has for years made forays into payments-related ventures, with the advent of the iPhone in 2007 setting the stage. . . .