Regulators met last week to figure out where they fit in the emerging world of electronic commerce. But after a daylong meeting of the Consumer Electronic Payments Task Force, created nine months ago by Treasury Secretary Robert E. Rubin, not much progress was made.
At the task force's first meeting last Monday, Comptroller of the Currency Eugene A. Ludwig announced its goal is to "identify innovative nonregulatory responses that may be needed for consumers in this developing market."
But a consumer advocate at the meeting ignored that principle and presented the task force with a draft regulation that would apply to all issuers of stored value cards. "We need to set a minimum floor of regulation," said Margot Saunders, managing attorney for the National Consumer Law Center. "If we don't do this now, we will have such diverse products ... that it will impossible in 10 years to overlay even a modicum of regulation."
Among other things, her plan would require receipts for all transactions of $5 or more and a host of disclosures.
Not surprisingly, representatives of Mondex, Visa USA, and MasterCard International-which are all involved with stored value card pilots-slammed the idea, arguing that it would stifle technological developments. "Any kind of regulation imparts a certain cost, and that will prevent stored value from competing with cash," said Mark Plotkin, a lawyer with Covington & Burling who represents Mondex USA.
Acting Federal Deposit Insurance Corp. Chairman Andrew C. Hove Jr. asked: "How can we bring these two opposite ends together? Is there some common ground?"
Lamar Smith, Visa USA's senior vice president of government relations, took a stab at an answer. If a government role is needed at all, he said, it should only be to ensure that issuers of E-money are financially stable. "That is something that the government should pay attention to," Mr. Smith said. "A failure would have a substantial impact on consumer confidence in what promises to be a major component of the money supply."
Mr. Ludwig, in an interview between panels, seemed ambivalent about the role regulators should play.
"There may well be a need for regulation like this, but it is really too early to tell," the task force chairman said. "Then again, you have to ask whether the technology is so high that you're not going to get any bucket- shop issuers."
Consumer groups and bankers did reach some consensus during the meeting. Both agreed that stored value cards should be issued only by banks. "Any issuer ... must meet high standards of financial soundness and responsibility," said John M. Lewis, president of the Bank of Fayetteville, Ark., and the American Bankers Association's representative.
"Banks, by the nature of their charters and the extensive system of regulation and supervision, clearly meet that test," he said.
John Harshaw, regulatory and legislative director, National Community Reinvestment Coalition, and Donet D. Graves Jr., vice president of Organization for a New Equality, agreed with Mr. Lewis.
"Financial institutions have a fiduciary responsibility to customers, and ... they have a responsibility to reinvest in their communities," Mr. Harshaw said.
The panel of seven regulators, which includes Federal Reserve Board Governor Edward W. Kelley Jr. and Jodie Bernstein, director of the Federal Trade Commission's bureau of consumer protection, will focus on consumer privacy issues at the next meeting, scheduled for July 17.
