Legal and Regulatory Developments

SPOTLIGHT: Visa Wanted a Vast Empire. First, It Had to Beat Back Its Foes.
The Wall Street Journal – October 19, 2024 (subscription may be required)

Visa is winning the decadeslong battle for control over how U.S. consumers pay for everything. It got here in part by paying for competition to go away and by using fees as weapons to make partners bend to its wishes.

One by one—as e-commerce exploded and Americans moved away from using cash—Visa has come up with strategies to keep financial and tech companies, including JPMorgan Chase, Apple, PayPal Holdings, Square and others from encroaching on its turf. All the while, it has steadily raked in a cut of many transactions done in this country—an arrangement that merchants and lawmakers have criticized for years.

Last month, after more than three years investigating, the Justice Department filed an antitrust lawsuit against Visa that alleges it illegally monopolized the market for debit-card payments. Visa’s actions, the suit said, created higher fees for merchants that are passed on to consumers and set the U.S. payments system years behind the rest of the world. . . .

How the CFPB’s Data Privacy Rule for Open Banking Could Impact Merchants’ Swipe Fees
Digital Transactions News – October 24, 2024 

While the Consumer Financial Protection Bureau is being sued over its data-privacy rule, merchants remain optimistic the regulation will help them reduce the impact of swipe fees by making account-to-account payments widely available at the point of sale.

The key is open banking, which paves the way to developing payment options that do not depend on the Visa and Mastercard network rails, says Stephanie A. Martz, chief administrative officer and general counsel for the National Retail Federation.

The CFPB’s personal financial data rights rule, released earlier this week, requires financial institutions, credit card issuers, and other financial providers to share data at a consumer’s direction with companies offering competing products through open banking. That same day, the rule was challenged in court by the Bank Policy Institute and the Kentucky Bankers Association. . . .

Trade Associations Challenge FTC’s Final Click-to-Cancel Rule
Bloomberg Law – October 23, 2024 (subscription may be required)

Multiple trade associations on Wednesday challenged in federal appeals courts the US Federal Trade Commission’s final “click-to-cancel” rule intended to help consumers more easily end subscriptions.

The Electronic Security Association, Interactive Advertising Bureau, and NCTA—The Internet & Television Association filed their petition for review Wednesday in the US Court of Appeals for the Fifth Circuit. The Chamber of Commerce for the United States and the Georgia Chamber of Commerce filed their challenge Tuesday in the US Court of Appeals for the Eleventh Circuit.

Both petitions call the FTC’s rule “an attempt to regulate consumer contracts for all companies in all industries and across all sectors of the economy” based on subscriptions irrespective of companies’ disclosures and say it creates “onerous” new regulatory obligations. . . .

Media, Small Biz Orgs. Fight FTC’s ‘Click to Cancel’ Rule
Law360 – October 22, 2024 (subscription required)

The Michigan Press Association and the National Federation of Independent Businesses lodged a challenge Tuesday to the Federal Trade Commission’s new “click to cancel” rule requiring that companies allow customers to ditch their subscriptions with a single click, telling the Sixth Circuit the commission has overstepped its authority.

The two organizations asked the appellate court to review the FTC’s finalized rule “on the grounds that it is arbitrary, capricious, and an abuse of discretion” under the Administrative Procedure Act and that it is unsupported by evidence, according to their notice of petition.

“The final rule is an attempt to regulate consumer contracts for all companies in all industries and across all sectors of the economy in which the customer purchases a service or subscription that will continue unless the customer exercises the option to cancel,” the petition states. . . .

CFPB Issues Final Rule on Open Banking
Banking Dive – October 22, 2024

The Consumer Financial Protection Bureau on Tuesday issued its long-awaited final rule on open banking — with a major tweak.

The rule would require financial institutions, credit card issuers and other firms to transfer personal financial data to other providers for free at the consumer’s request. But while last year’s proposal applied to data linked to bank accounts, credit cards and mobile wallets, Tuesday’s final rule applies to payment apps, too.

Rules surrounding the transfer of financial data, such as transaction records and information needed to initiate payments, are meant to ensure consumers maintain control of their banking history if they switch from one financial institution to another. . . .

Fiserv May Grab Competitive Edge With New Bank Charter
Payments Dive – October 21, 2024

Fiserv will have more wherewithal to undercut competitors on price after the payments processing giant obtained a special bank charter in Georgia earlier this month, consultants who follow the payments industry say.

Milwaukee-based Fiserv currently partners with banks to process credit and debit card transactions for merchants. The Georgia Department of Banking and Finance announced on Oct. 4 that it was giving the payments company a merchant acquirer limited purpose bank (MALPB) charter on a conditional basis, allowing it to process those transactions without a partner bank.

Fiserv now “owns the entire transaction,” said Tony DeSanctis, a senior director of payments for the consulting firm Cornerstone Advisors. . . .

Fintech Trade Group Sues CFPB Over BNPL Regulation
Payments Cards & Mobile – October 21, 2024

The Financial Technology Association (FTA), representing major BNPL (Buy Now, Pay Later) providers, has filed a lawsuit against the US Consumer Financial Protection Bureau (CFPB) to block a new rule that applies credit card protections to the BNPL market.

Filed in the US District Court of the District of Columbia, the lawsuit challenges a CFPB rule issued in May 2024, which imposes traditional credit card protections on BNPL products.

BNPL providers such as Affirm, Klarna, PayPal, and Block offer consumers the ability to make purchases in installments, usually in four payments, without paying interest. . . .

UK Government Pushes Ahead With Buy-Now, Pay-Later Regulations
BNN Bloomberg – October 17, 2024

The UK’s new Labour government proposed a series of stricter rules for buy-now, pay-later lenders as it seeks to make good on an election promise to rein in the industry.

The Treasury has invited industry players to comment on proposals that would bring buy-now, pay-later companies under the supervision of the Financial Conduct Authority, according to a statement. The proposed rules would also subject BNPL providers to the Consumer Credit Act, forcing them to comply with many of the same rules as credit card issuers.

“Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow,” Economic Secretary to the Treasury Tulip Siddiq said in the statement. . . .

Industry Developments

SPOTLIGHT: Apple Pay’s 10-Year Journey and Its Next Decade of Decisions
PYMNTS – October 22, 2024

PYMNTS Intelligence published its annual report on the usage and adoption of Apple Pay yesterday (October 21). That report marked the ten-year milestone of Apple Pay’s launch, which was the mobile wallet shot heard round the world.

Apple Pay wasn’t the world’s first digital wallet — and it wasn’t even the first mobile wallet developed by Big Tech (remember Google Wallet in 2011?) — but it was the first wallet connected to an indispensable piece of hardware, from a brand that users loved and considered their lifeline to the digital economy.

The promise at launch was to use the iPhone and Apple Pay combo to replace cards entirely at the physical point of sale — at least, that’s what Tim Cook promised. It seemed like a lofty ambition in 2014 since not many iPhone users had the right phones to activate Apple Pay then, many merchants lacked contactless terminals to accept it, and few issuers were willing to provision cards for it (and pay Apple a fee to do it). . . .

Apple, Klarna Collaborate on BNPL
Payments Dive – October 18, 2024

Cupertino, California-based Apple on Thursday gave Apple Pay customers in the U.S. and U.K. one more way to buy items in four interest-free installments by linking with the Swedish buy now, pay later firm Klarna.

Stockholm-based Klarna will also make its BNPL option available for Apple Pay users in Canada in coming months, the company said in a Thursday news release, which did not provide an exact date for that launch.

The partnership is part of Klarna’s expansion plans. “This is a big step toward our mission to offer consumers Klarna at every checkout,” CEO Sebastian Siemiatkowski said in the release. . . .

Read Payments News Update – October 25, 2024 at constantinecannon.com