Legal and Regulatory Developments

SPOTLIGHT: Tech Groups Sue to Block CFPB Rule Targeting Apple, Google
Bloomberg Law – January 16, 2025

A pair of trade groups representing Facebook parent Meta Platforms Inc., Apple Inc., and Google parent Alphabet Inc. sued to block a Consumer Financial Protection Bureau rule that’s set to bring those companies’ payment operations under the agency’s supervision.

The CFPB failed to show that digital payment companies subject to the agency’s “larger participant” rule posed a risk to consumers as required under the 2010 Dodd-Frank Act, TechNet and NetChoice LLC said in a complaint filed Thursday in the US District Court for the District of Columbia.

“The Bureau has sought to define a purported market for supervision without finding—in accordance with the statutory structure that focuses on consumer risk—that consumers in that market were being harmed or that there were any consumer protection risks that CFPB supervision could or would remedy, much less any that were not already being addressed by state-level supervision,” the complaint said. . . .

Maryland Is the Latest Batter to Take a Swing at Regulating Interchange on Sales Tax and Tips
Digital Transactions News – January 22, 2025

The Maryland legislature held a hearing late Tuesday on a bill prohibiting interchange from being charged on sales tax and gratuities linked to credit and debit card transactions.

The bill, introduced by Delegates Todd Morgan and Brian Crosby, is the latest in what is expected to be a flurry of similar bills to be introduced in statehouses this year. The Washington state legislature on Friday held a hearing on a bill introduced in December that would exempt from interchange calculation tips and gratuities on card transactions.

Both bills are modeled after the Illinois Interchange Fee Prohibition Act, which passed in 2024 and is being challenged in court. A federal judge issued an injunction against the IIFPA in December, putting the bill’s July 1, 2025, implementation date on hold. . . .

CFPB to Consider Broader Ban on Declined Payment Fees
Payments Dive – January 21, 2025

The Consumer Financial Protection Bureau withdrew a proposed rule that would have barred banks from charging fees when debit card transactions and certain other payments are declined in real-time. The agency said it was considering “a more comprehensive approach” as part of the change last week.

The rule proposal made last year would have prohibited financial institutions from charging “non-sufficient funds (NSF) fees” with rejected payments made using a debit card or some types of peer-to-peer payments tools, according to a planned Jan. 14 Federal Register post. The rule also would have barred those types of fees when ATM withdrawals were rejected for lack of funds.

That objective set under the Biden administration may face a difficult path under the Trump administration. President Donald Trump’s team has suggested it will be less restrictive in its approach to regulation. . . .

DOJ Fights Visa’s Bid to Duck Monopoly Case
Law360 – January 21, 2025 (subscription required)

The U.S. Department of Justice urged a New York federal court not to toss its case accusing Visa of illegally maintaining a monopoly over debit card networks, saying the company’s dismissal bid misconstrues the law and wrongly tries to expand the market at issue.

The DOJ responded Sunday to a motion seeking dismissal of its case accusing Visa Inc. of violating antitrust law by penalizing merchants and banks that route payments through alternative systems and by partnering with would-be competitors rather than competing.

Visa argues in its motion that enforcers are viewing the market at issue too narrowly by ignoring competition from certain rival networks, but the DOJ contends that the motion fails to address the actual allegations in the complaint and instead “addresses strawmen that bear little resemblance to the facts alleged.” . . .

Mastercard, Commonwealth Bank’s Major Push to Ban All Card Surcharges: ‘Negative Impact’
Yahoo! Finance – January 16, 2025

Banking and financial heavyweights are campaigning for debit and credit surcharges to be banned across the country. The Reserve Bank of Australia (RBA) is conducting a lengthy investigation into the surcharging ecosystem and is due to release its report later this year.

The central bank has been taking submissions from stakeholders to hear how surcharging affects them. Mastercard’s submission, shared with Yahoo Finance, said that after 20 years, the landscape desperately needed a shake-up.

“Mastercard supports a ban on surcharging across credit and debit on designated schemes as the current surcharging practices are not resulting in market efficiencies,” it said. . . .

Industry Developments

SPOTLIGHT: AI Promises 2025 Advances for Payments Industry
Payments Dive – January 21, 2025

Artificial intelligence has already changed the payments landscape in ways the average consumer and business owner may not notice, but in 2025, the emerging technology might make itself more visible as we pay for goods and services, according to analysts and academics who follow the payments industry.

Fighting fraud, for example, is one of the key practical applications of AI. But it is something a consumer is unlikely to think about unless their credit card number is stolen or their bank account is hacked. As the technology advances, however, consumers may find that it gives them more payment options and more suggestions about what to buy.

While programs like the chatbot ChatGPT have made headlines in recent years for imitating humans in some limited conversations and occasionally writing convincing essays, the programs that most financial technology and payments companies use are older than that, stressed John Wilson, director of the MS Fintech program at the University of Connecticut’s School of Business. . . .

Inside Citi’s Quest to Battle BNPL Fintechs
American Banker – January 22, 2025 (subscription required)

Citigroup is making progress with installment lending, an option that banks have been slow to embrace while fintechs have grown the market.

Citi Pay Installments, which was launched in late 2023 as part of the City Pay menu of alternative credit and payment products, has attracted 195 merchants in the U.S., the product’s initial market. Sales have expanded 20% per month, with early adopters including PODS, Hublit and LGC.

The bank will need to dramatically add to that network as it faces other financial institutions that have warmed to BNPL, and firms such as Klarna, Affirm and Afterpay that have gotten a headstart. . . .

Chase on Track to Retain Acquiring Crown With Annual Volume Well North of $2 Trillion
Digital Transactions News – January 20, 2025 

New data from JPMorgan Chase & Co. signals the leading U.S. banking company is on track to retain its title as the nation’s largest merchant acquirer, with volume well in excess of $2.5 trillion flowing through its pipes.

A note from a Chase spokesperson to Digital Transactions News summarizing the company’s fourth-quarter and full-year 2024 payments results says the Merchant Services unit “hit $2 trillion in volumes.”

The note did not provide a specific number, however, nor did documents Chase released last week with its fourth-quarter earnings report. But the spokesperson referred to an Oct. 17 LinkedIn post from Max Neukirchen, global co-head of J.P. Morgan Payments, which said, “I am excited to share that our Merchant Services business surpassed the $2 trillion sales mark this week. We reached the milestone 21 days earlier than in 2023 and 54 days ahead of 2022.” . . .

Read Payments News Update – January 24, 2025 at constantinecannon.com