Lamar Smith joined Visa U.S.A. as vice president of government affairs in December 1992, after serving five years as Republican staff director to the Senate Banking Committee.
For the most part, it was a very good year for the bank card industry. Congress passed a bankruptcy bill and telemarketing fraud legislation that banks supported. It also added a "fix" to the interstate branching bill to ensure banks would be able to continue exporting interest rates across state lines.
A fourth measure, amendments to the Fair Credit Reporting Act, worked out in the industry's favor when an amendment was added to deal with the "Rodash" case -- a decision that would have permitted many mortgage holders to get out of their contracts. That bill died in the final days of the congressional session.
With those bills behind him, Mr. Smith spoke about legislative concerns of the bank card industry.
Q.: What are the prospects of credit reporting reform's passing next year?
SMITH: There is still some small chance that it could be taken up when Congress returns to do the lame duck session at the end of November.
But at the beginning of next year, it's pure speculation to say whether they would take up fair credit and Rodash again. I think there is a good probability that there will be an attempt to pass a housing bill, early in the 104th Congress, and that could provide a vehicle for Rodash.
Q.: What aspects of the bankruptcy reform legislation will help out the bank card industry?
SMITH: We got quite a few things that were very important to the industry, like the "nondischargeability presumption period," and raising the debt limit for Chapter 13 filings was also very good.
When you go into Chapter 7 bankruptcy, you basically do a liquidation, and a bank card issuer who has credit out to the person filing for bankruptcy rarely gets anything of any significance in a liquidation.
But in a Chapter 13, you do a workout, and a person tries to repay his or her debts over time, and typically a bank card issuer will achieve a higher recovery through a Chapter 13 as opposed to a Chapter 7.
Q.: Were there any industry issues that were not resolved during this legislative session?
SMITH: There was a technical corrections tax bill that included a provision to enable the Internal REvenue Service to accept credit cards in payment of taxes. It did not pass at the end of the session and if it doesn't get taken care of in this lame duck session, that could be an early issue next year.
Basically, we were concerned about the provision until we got the bankruptcy bill fix, where debts incurred to pay income taxes are non-dischargeable.
I think that that removed one of the major industry concerns about the bill. I think the industry needs to go back and look again, and see that with that change in the bankruptcy code, whether on balance it would be beneficial to have the IRS accepting credit cards.
Q.: What are some of the issues you see cropping up with federal regulators?
SMITH: The Federal Reserve is currently proposing to rewrite Regulation E. It could have a major impact on the future development of stored value cards.
Under Reg E, you are required to issue periodic statements about access to accounts, and give customers records of transactions. If Reg E is written in such a way that, using a stored value card, you would have to send periodic statements and give receipts for transactions with the card, it would probably severely impede development of the card, or completely stop it in its tracks.
If you buy a stored value card, and you use it, say, to buy a Coke from a machine, or to put money in a parking meter, there's no way that the bank that sold you the card is going to be able to track all of those transactions. It's infeasible. But Reg E could be interpreted that way, so we are encouraging the Fed to not require that kind of disclosure.
Similarly, you may go into a financial institution and buy a stored value card, even though you have no other account relationship with that institution.
Or say you have a son or daughter in college, and you want to send them some spending power. You could buy a stored value card and send it to them.
Well, the financial institution selling that card may very well not have an address to find you to send a periodic statement to. So it would be impossible for them to comply with a Reg E requirement that a statement be issued.
So what we're saying is if you use a stored value card and you want to apply the statement and transaction disclosure requirements to it, apply those only when you load value onto the card.
That is to say when you go to an ATM and put funds from your checking account onto your card, we'll send you a statement on that transaction, but then when you go out and use the card, we shouldn't have to give you a statement.
Otherwise, it would be like taking a fare card here in the Washington subway and saying you've got to be sent a statement for every time you go through the turnstile.
The Federal Trade Commission has a proposal out to require that credit bureaus disclose credit scores on consumers and how those scores were calculated. We're arguing that that is not an appropriate disclosure for consumers.
That's not the kind of disclosure that the Fair Credit Reporting Act is intended to have made to consumers. Secondly, it would confuse consumers.
