Legal and Regulatory Developments

SPOTLIGHT: Merchants Hit Back at a Banking Group’s Request That the Fed Hold Off on Reducing a Debit Interchange Cap
Digital Transactions News – December 24, 2024

The Merchants Payments Coalition fired back late Monday at a request last week from the American Bankers Association that the Federal Reserve not act on a proposal to lower a longstanding limit on the interchange banks can earn on debit card transactions.

In a letter to the Fed, the MPC argues the banking industry wants to extend the “status quo” on debit interchange, which it argues Visa Inc. and Mastercard Inc. set at “lucrative levels that exceed the reasonable and proportional standard Congress established.”

“We urge the Board to reject the ABA’s request for further delay in the finalization of the Board’s necessary and long-overdue Reg. II updates,” the MPC says in its letter to Fed chairman Jerome Powell. . . .

Consumer Financial Protection Bureau Sues Big Banks Over ‘Widespread’ Fraud on Zelle App
USA Today – December 26, 2024

The U.S. Consumer Financial Protection Bureau said on Friday it filed a lawsuit against JPMorgan Chase, Bank of America and Wells Fargo for failing to protect consumers from alleged “widespread fraud” on payments platform Zelle.

The lawsuit was initiated as the watchdog moves ahead with a bold agenda in the final weeks of Joe Biden’s Democratic administration in a bid to advance consumer protections before President-elect Donald Trump overhauls the agency, Reuters reported last month. The moves defy congressional Republicans, who have called for agencies to cease rulemaking.

The CFPB seeks to stop the alleged unlawful practices via Zelle, secure redress and penalties, and obtain other relief for consumers, it said in a statement. . . .

What to Watch as the Debit Interchange Fee Battle Heats Up in 2025
PYMNTS – December 26, 2024

Sweeping changes to debit card interchange fees — and the ways debit transactions are facilitated — may come in 2025. As a result, the economics of debit payments may also change, with ripple effects that impact issuing banks, merchants and consumers.

Front and center is what will happen with the Federal Reserve’s proposed rule to cap interchange fees, which are the charges levied on merchant’s banks by the banks that issue debit cards. The regulation would reduce the “base component” of the interchange fee cap to 14.4 cents from 21 cents. The proposed rulemaking would also reduce the ad valorem component to 0.04%, a reduction from the current 0.05%.

Elsewhere, fraud prevention fees would rise to 1.3 cents, which would be a boost to the penny-per-transaction fee that has historically been in place. . . .

An Injunction Against Illinois’s Interchange Act Leaves Both Sides Claiming Victory
Digital Transactions News – December 23, 2024

United States District Court Judge Virginia Kendell granted a preliminary injunction late Friday that provides banks some relief from the pending Illinois Interchange Fee Prohibition Act, but also gives merchants reason to cheer.

Kendell, who is overseeing a lawsuit filed against the IIFPA, ruled the injunction applies only to financial institutions regulated by the National Bank Act and Homeowners Credit Loan Act, not issuers with Illinois state banking charters, nor the Visa and Mastercard networks. The latter part of her opinion is why merchant organizations are claiming victory.

Kendell’s ruling sent attorneys for plaintiffs and defendants scrambling to analyze the potential impact of the injunction on the payments industry, should the ruling stand. . . .

Year in Review 2024 – Choice Is the Name of the Game
The Green Sheet – December 23, 2024

When it comes to paying for goods and services, choice is the name of the game. Consumers want to be able to choose which of many payment options they use: cards, cash, mobile and digital wallets, their bank accounts, or perhaps with a payment plan. They also want to choose how they use those payment methods, for example, whether it’s a plastic card, a card in a digital wallet, a card on file, or tapping their mobile devices or cards to a POS device.

Businesses want choices, too. Typically, they want to be able to accept payments however their customers choose to pay. But perhaps more importantly businesses want to pay as little as possible for accepting payments. And therein lies the most contentious issue in the payments space.

As it has been for the past many years, the topic of interchange was in the news a lot this year. Senator Richard Durbin, the Illinois Democrat who authored the “Durbin Amendment,” which caps the interchange the card brands (and card-issuing banks) can charge for debit card payments, continued his push for “Durbin 2.0.” . . .

Industry Developments

SPOTLIGHT: AI, Interchange, And Open Finance Are the Top Prospective 2025 Payments Trends
Digital Transactions News – December 23, 2024

The outlook for payments in 2025 will be rife with open finance, instant payments, multi-rail payments, interchange questions, and the increasing use of artificial intelligence, observers suggest.

The top three payments trends next year will be open finance, instant payments adoption, and point-of-sale innovations, says Capgemini Research Institute in its “Capgemini Financial Services Top Trends 2025” report.

Already a hot topic, open finance will emerge with a broader scope than open banking, which enables consumer portability of select financial-account information, opening the door for easier access to many types of financial accounts and payment services, the report notes. Open finance expands this scope to include a “360-degree financial footprint” that includes accounts like insurance, investments, and retirement holdings, Capgemini says. . . .

Visa Finalizes Featurespace Purchase to Boost Fraud Prevention
PYMNTS – December 19, 2024

Visa said it completed its acquisition of financial crime/payments fraud prevention provider Featurespace.

“Visa will add Featurespace’s capabilities into its range of fraud prevention and risk-scoring offerings,” the payments giant said in a Thursday (Dec. 19) news release. “By combining the two companies’ highly complementary products and tools, customers will have access to enhanced fraud protection services to help keep their businesses safe and secure, including real-time detection of sophisticated fraud attacks, without adding friction to the user experience.”

Featurespace’s business now becomes part of Visa’s Risk and Identity Solutions unit. In the months ahead, its products will be woven into Visa’s offering to expand on its fraud prevention solutions and use cases, according to the release. . . .

Read Payments News Update – January 3, 2025 at constantinecannon.com