Page 26 - GS240202

CoverStory

"If the current proposal to reduce the debit interchange fee In October 2023, the Federal Trade Commission proposed
cap is finalized, the research suggests that consumers will a new "rule on unfair or deceptive fees," for the non-bank
pay an extra $1.3 billion to $2 billion annually in higher financial services providers it oversees. The commission
bank account fees," the white paper stated. It was written said it was specifically interested in add-on fees that in-
by Nick Bourke, former director of consumer finance at flate the total cost of goods and services.
The Pew Charitable Trusts.
While credit card surcharges were not mentioned in the
Bourke estimated that interchange revenues at card-issu- original proposal, the FTC said the issue was raised in sev-
ing banks would fall by $3 billion annually. That would be eral comment letters, so it was added to the list. One letter,
offset, in part, by $1.3 billion in higher monthly account referring to restaurant fees, quipped, "It's difficult to un-
maintenance fees, while other consumer account fees eat a meal if you disagree with these fees."
would increase by between $250 million and $700 million,
Bourke predicted. Any consumer pass-through savings The FTC said the rule will give it more authority to go
would be so negligible that they couldn't be estimated, he after companies that unfairly hike prices at the register.
added. Of particular concern is what the FTC defines as an "ancil-
lary good or service." For example, it said, "If a business
Big tech in crosshairs includes a fee the consumer cannot reasonably avoid to

The Consumer Financial Protection Bureau is contemplat- process the payment for any good or service, such pay-
ing a regulatory regime for big tech companies that pro- ment processing would be a mandatory ancillary service."
vide person-to-person payment services. Its stated inten-
tion is to have regs in final form this year. Jonathan Razi, an attorney and expert on credit card sur-
charging, expects "a lot of push back" if the FTC moves
The bureau wants to regulate big tech companies that of- forward with the proposal.
fer digital wallets and other payment applications; its aim DOJ scrutinizes Visa
is to ensure that those companies play by the same con-
sumer protection rules that banks and credit unions must. It was revealed last year that the Department of Justice has
The move is directed solely at the biggest of big tech— an ongoing investigation of Visa. At issue is Visa's practice
companies handling more than 5 million consumer digital of charging higher fees to merchants that choose not to
payments yearly. That includes Amazon, Apple, Google, use the network's exclusive tokenization technology, ac-
Meta, PayPal and Block, the CFPB said. cording to published reports. Mastercard previously set-
tled a similar case with the DOJ, which sees the practice as
In a recent blog post, the law firm Greenberg Traurig a violation of federal antitrust law.
stated it expects that if the rule is adopted as proposed,
it will "directly impact about 17 companies that together Tokenization was introduced nearly a decade ago. The
facilitate approximately 88 percent of transactions in the technology replaces a credit/debit card's 15-digit account
payments space.". number with a unique token accessible only by the card
brand. Bloomberg reported that over 4 billion tokens have
The CFPB stated in a press release that big tech firms of- been used by Visa with more than 13,000 merchants.
ten blur the traditional lines between banking and com-
merce. The proposed new rule would allow the bureau to Senate jawboning on P2P, BNPL
supervise these companies for compliance with applicable While the paralysis that has been gripping Congress has
consumer financial protection laws, such as protections stymied consideration of major legislation, congressional
against unfair and deceptive acts and practices, as well as committees continue to monitor developments in consum-
privacy rights. er payments.

"The CFPB's focus on increasing competition by breaking Senator Sherrod Brown, chair of the Senate Banking Com-
up Big Tech's seeming competitive advantages could result mittee, has been vocal about the prevalence of scammers
in significant new compliance risks to covered businesses, on P2P payment networks, arguing that network opera-
such as operational disruptions during examinations and tors and FIs aren't doing enough to protect consumers.
financial penalties in the event of non-compliance," Green-
berg Traurig wrote. "Scammers and fraudsters have ramped up their efforts to
What about junk fees? take people's money. Banks and payment apps have stood
on the sidelines while the problem has only gotten worse,"
Dual pricing arrangements that help defray merchant he said at the start of a Feb. 1, 2024, hearing on the matter.
costs by shifting some or all processing fees to purchasers, "And now we're faced with the possibility that artificial
could get caught up in the Biden Administration's cam- intelligence will make these problems worse." Banks and
paign against junk fees. payments companies "are not doing nearly enough to pre-
pare for the threat AI poses in increasing the scale and
impact of scams," he added.
26