There is a renewed focus on payments policy in 2023. This year, most of the discussion has revolved around the Credit Card Competition Act, as card-focused legislation has not seen the floors of Congress since 2010. However, there are many externalities in card issuance and acceptance that have kept the focus of regulators: mainly the Federal Reserve, Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). These three agencies have each announced activity regarding U.S. payments.
Proposal to reduce the regulated debit cap
The Federal Reserve met on Wednesday, October 25, 2023, to discuss a proposal to lower the regulated debit cap for the first time since it was originally mandated in 2011. Their proposal was in two parts: first, to lower the debit cap from $0.21 + 0.05% with a $0.01 fraud prevention adjustment to $0.144 + 0.04% with a $0.013 fraud prevention adjustment – representing an approximate 28% reduction in the overall cost. Secondly, they proposed a method of tying the regulated rate directly to their biannual release on US debit data, allowing a regular, formulaic update to the cap every two years. Following the publication of this proposal in the Federal Register, there is a 90 day comment period in which industry stakeholders will have an opportunity to make their voices heard on all aspects of the proposal.
Fostering Open Banking Growth
On June 12, 2023, the CFPB released a blog post entitled “Laying the foundation for open banking in the United States”. Open Banking is not a new concept worldwide but has been slow to enter the U.S. as a viable payment method for C2B and P2P payments. The CFPB states that they hope to accelerate the growth of open banking in the U.S. by formalizing an “unused legal authority” that was enacted as part of the Section 1033 rulemaking of the Dodd Frank Act. The data rights afforded in the rulemaking would allow consumers to have more control over who, or what entities, get access to their personal financial data, allowing them to switch and change relationships with financial institutions more easily.
Further in the article, the CFPB notes that they are responsible for solving “certain core issues” that lead to innovation to be deadlocked or consumers’ needs not being fully addressed. Similar to the CCCA, the CFPB notes that a competitive market approach will be the best way to establish an open banking environment in the U.S., after those core issues are addressed.
“Click-to-cancel” and Negative Option Marketing
On March 23, 2023, the FTC proposed a provision around consumers’ ability to cancel subscription payments (also referred to as negative option marketing). This notice of proposed rulemaking (NPRM) was published with a 3-1 vote, and in regard to the NPRM, FTC Chair Lina M. Khan said, “Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place”.
The proposal includes three key aspects of consumer interaction with subscriptions.
- Requiring that canceling a subscription is “at least as easy” as starting one. For example, if a subscription can be signed up for online, it must be cancellable online as well.
- Requiring consumer consent before showing special deals and offers when a consumer goes to cancel a subscription.
- Requiring an annual reminder for consumers who have subscriptions for non-physical goods and services before they are automatically renewed.
What to look out for in 2024
Regulators like the Fed, CFPB, and FTC could continue to focus on payments as they become even more ubiquitous and bring in more stakeholders facing consumers and businesses alike. With the FTC ruling, subscription merchants should prepare for a potential compliance deadline regarding the ruling and stay up to date on developments from the FTC since the comment period closed on June 23, 2023. The CFPB has shown that they are hoping to accelerate the growth of open banking in the U.S., which is a payment environment entirely outside of typical card infrastructure. Regarding both the Open Banking and debit regulated rate proposals, it is imperative that the merchant community make their voices heard. Reach out to Beth Provenzano to get involved with the MAG’s working group on comments, and if you would like to keep up to date with everything going on in Washington, please ask about joining our Advocacy and Communications Committee