The electronic-payments industry has come under unprecedented government scrutiny in the past 18 months, and it is unlikely to let up any time soon, contends a top official from the Electronic Transactions Association.
“The era of self-regulation has ended,” Mary Weaver Bennett, the association’s director of government and industry relations, noted during a July 28 presentation at the Midwest Acquirers Association Annual Conference in Oak Brook, Ill.
Moreover, the days of relative calm appear unlikely to return, Bennett told attendees. “You can’t put the toothpaste back in the tube,” she noted.
Her “hot list” of legislative and regulatory action began with a summary of the year-old Dodd-Frank Act’s restrictions on the financial-services sector and a recounting of the act’s Durbin amendment, which will result in the Federal Reserve capping debit card interchange fees in October.
The Fed’s final rule, issued July 21, limits debit interchange to about 24 cents, roughly half of the 44-cent average most banks had been charging.
In response to an audience question, Bennett confirmed that the debit-interchange cap does not directly affect how much independent sales organizations may charge for transactions.
Interchange is just a portion of the discount rate charged to merchants, so ISOs and acquirers can decide themselves how much of the reduced interchange gets passed on to merchants. Acquirers pay issuers interchange when their cards are used for payment.
In other regulatory matters, Bennett predicted ISOs will have difficulty complying with a new Internal Revenue Service rule requiring them to report merchants’ transactions. The names the IRS has on file for many merchants do not match those in ISOs’ databases, often varying by a single character. When ISOs report the transactions and the names do not match exactly, the IRS will not accept the reports, she said.
The Protect IP Act, short for the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011, represents another potential source of problems, Bennett said.
The law allows victims of intellectual-property theft to seek restitution from payments processors involved in the deal, Bennett said. Calling the provision “daunting,” she noted that it passed unanimously in a congressional committee.
“You just don’t see that kind of bipartisanship very often,” Bennett said of the consensus in committee. But the bill’s strong support from the influential television, motion picture, music and retailing industries, has swayed legislators, she noted.
Just the same, the industry should strongly oppose that aspect of the law, Bennett says, noting it “can’t monitor the world for counterfeit goods.”
As for data breaches, however, Bennett said a government effort to standardize reporting represents a bright spot in the legislative and regulatory picture. The Electronic Transactions Association has advocated standards, she noted.
Meanwhile, the industry is awaiting details of how the new Consumer Financial Protection Bureau will discharge its duty to guard the public, Bennett said. She expressed unease about a credit card complaint form that appears on the bureau’s site. Consumers may use the form to contest their bills (
ISOs can respond to any of those federal activities by contacting their legislators, another speaker, Holli Targan, a lawyer with Jaffe, Raitt, Heuer & Weiss PC, told attendees.
“That’s who they’re going to listen to,” Targan said, referring to ISOs’ discussions with their representatives in government.
Targen offered the audience details on the Dodd-Frank Act and emphasized the relatively new law contains “lots of nuances.”
She urged ISOs to review their card-services agreements with merchants and change any provision affected by the law. In particular, ISOs should stipulate in the agreements that merchants let ISOs make routing choices.
Further details of the merchant agreement and state and federal intervention in payments occupied a conference presentation by Adam Atlas, an independent lawyer specializing in acquiring-industry issues.
“As more and more of the economy flows through your hands, the government will want to have a hand in it,” Atlas told attendees in a reference to electronic payments’ growing importance relative to cash and check use.
The merchant agreement, should protect ISOs and merchants, preventing “arbitrary grabs of revenue,” Atlas said.
What do you think about this? Send us your feedback.
