The Green Sheet Online Edition
February 2, 2025 • 25:02:01
New Congress has plenty on its plate
The 119th U.S. Congress has barely begun, yet lobbyists are already gearing up for a fight over the Credit Card Competition Act. Introduced as a bipartisan bill in both houses of the last Congress, it would require merchant choice over which networks are used to process credit and debit card payments they accept.
But this is not the only activity in Washington that could affect the payments sector. There will be battles involving the Consumer Financial Protection Bureau. Opposition is building over the CFPB's data sharing rule, as well as a proposal that would subject earned wage access products to federal credit laws, notably the Truth-in-Lending Act and its corresponding rule set, Regulation Z.
The CFPB's funding also will come under fire. Currently, the agency receives its operating income from the Federal Reserve, which wrote many of the consumer protection regulations it enforces. Some in Congress, including Representative Andy Barr, R-Ky., who chairs the House Financial Services Committee, complain that its funding source exempts the agency from congressional oversight.
Cryptocurrency will also be a hot topic for the 119th Congress as it works with the Trump Administration.
Durbin 2.0 won't go away
No sooner had members been seated and given their committee assignments in the new Congress than commercials began running on Washington, D.C. television stations panning the Credit Card Competition Act as a give-away to big box stores and a disaster for mom-and-pop shops.
While the legislation had yet to be introduced, the commercials referred to it as the "Durbin-Marshall plan," referencing the two senators who originally introduced it: Senators Richard Durbin, D-Ill., and Roger Marshall, R-Kan.
The legislation has been panned broadly by the financial services industry, which has coalesced under the banner of the Electronic Payments Coalition. In June 2023, the bill gained as a co-signer Senator J.D. Vance, R-Ohio. His support may have waned, however. In January, The Washington Reporter, a news site serving Capitol Hill and executive branch staffers, reported that the EPC had contributed $1 million to President Trump's inaugural committee.
That followed the release of a study by EPC detailing how the bill, if enacted, could cost the U.S. economy $227 billion and 156,000 jobs over the space of four years. The data was based on an analysis by economic forecaster Oxford Economics Research.
The research warned that the impact on popular tourist spots could be "catastrophic," comparing it to the downturn following the COVID outbreak. Analysts believe that the bill, if enacted, would likely force card-issuing banks to scale back credit cards or rewards. "The U.S. economy cannot afford a quarter-trillion dollar hit, and workers in cities across the country should not have to suffer so corporate megastores can pad their profits," said Richard Hunt EPC executive director.
Neil Walker, managing director of macro modeling and scenarios at Oxford Economics, said local merchants will be hardest hit. "The data highlights the outsized impact this policy could have on areas dependent on travel and hospitality-driven revenues, which are especially vulnerable to shifts in rewards-driven consumer behavior," Walker said.
CFPB rules under fire
The banking industry is taking issue with the CFPB's data sharing rule, which is part of an effort to push the United States toward an "open banking" system. Open banking, which had its genesis in Europe, is a financial services model that uses secure APIs to share data between financial institutions and authorized third parties.
Acting under authority granted it by the Dodd-Frank Act, the CFPB penned a personal financial data rule that grants consumers control over what organizations can access their critical banking information, and to what extent.
A survey recently released by the American Bankers Association revealed that financial institution (FI) executives are "dubious" about the CFPB's data-sharing rule, with nearly a third saying it will not benefit FIs or their customers. Whether this will result in a push for changes is unclear, but the banking industry tends to have more clout when Congress is controlled by Republicans.
Meanwhile, the CFPB is getting slammed over a proposed interpretive ruling that earned wage access products are consumer loans subject to the Truth-in-Lending Act. As such, providers are required to disclose associated costs and fees prior to the release of money.
Earned wage products allow workers to obtain wages that are earned prior to payday. According to a CFPB study, demand for these products continues to grow, with the average worker in its sample logging 27 such transactions a year, for which they paid an average fee of $3.18.
The CFPB ruling reversed a policy issued under the first Trump Administration, so it's probable the rule could change again under the second Trump Administration.
CFPB funding questioned, again
The CFPB, unlike most government agencies, is not funded through congressional appropriations, but by the Federal Reserve, which obtains its operating revenue from fees assessed FIs for things like payment processing services.
This has been a stick in the craw of many in the industries it regulates, as well as Republican lawmakers. However, the U.S. Supreme Court upheld the funding structure as constitutional in a ruling handed down last May.
Rep. Barr wants to overturn that decision legislatively. Almost as soon as the new Congress was seated he introduced the Taking Account of Bureaucrats' Spending Act to subject the CFPB to the congressional appropriations process.
"The CFPB is the most unaccountable and unchecked agency in the entire federal bureaucracy," he said. "By introducing the TABS Act, I am taking action to bring the CFPB under the scrutiny it desperately needs."
A turnaround on digital assets
Expect copious deliberation over cryptocurrencies in Washington over the next few years. As one of his first official acts, President Donald Trump signed an executive order banning the creation and issuance of central bank digital currencies (CBDC) in the United States, in effect overturning an executive order issued by former President Biden in 2022, which called for a framework to explore digital asset regulation and the potential development of a CBDC.
Legislation banning CBDCs passed the House in May 2024 with backing from Democrats and Republicans but failed to garner Senate approval. To date, fewer than a dozen countries have CBDCs, primarily third world countries, although the Bank of England is considering a digital pound, and the European Central Bank is working on a digital euro pilot that could launch as soon as 2028.
While the Fed had been studying the CBDC concept, that work appears to be in the early stages. "People don't need to worry about a central bank digital currency; nothing like that is remotely close to happening any time soon," Fed Chairman Jerome Powell told the Senate Banking Committee in March 2024, according to published reports.
Making U.S. crypto leader
Trump's executive order appears to fulfill a campaign promise he made to the cryptocurrency industry that he would support Bitcoin over a CBDC. While on the campaign trail, Trump also vowed to make the U.S. a global leader in digital financial innovation.
Additionally, Trump's executive order mandates the creation of a national digital asset stockpile. According to reporting by Yahoo Finance the federal government already holds more than 198,000 Bitcoins, which as of this writing, would be valued at nearly $21 billion.
Trump's priority aligns with the Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act introduced in the U.S. Senate in July 2024 by Senator Cynthia Lummis, R-Wyo. She described the creation of a strategic Bitcoin reserve as a step in a broader plan to reduce the national debt. Her Act would have had the United States sell gold certificates held by the Federal Reserve, using that money to purchase 1 million Bitcoins over a span of 20 years with an objective of owning roughly 5 percent of the total supply of the cryptocurrency.
"Bitcoin is transforming not only our country but the world, and becoming the first developed nation to use Bitcoin as a savings technology would secure our position as a global leader in financial innovation," Lummis said at the time, adding "This is our Louisiana Purchase moment."
Several states already are considering investments in Bitcoin, including Arizona, Oklahoma, South Dakota and Texas,
Trump's executive order also could lay to rest a brewing controversy over whether cryptocurrencies are securities, subject to regulation by the Securities Exchange Commission, or commodities, which would mean the Commodities Futures Trading Commission would be the primary regulator.
Legislation that would have set that battle to rest passed the House in May 2024 with overwhelming bipartisan support—over the objection of then President Joe Biden. The bill never made it to his desk, however, because the Senate declined to pass similar legislation.
Trump's executive order addresses the schism by creating a presidential working group to draft a regulatory framework for digital assets like cryptocurrencies and stablecoins inclusive of market oversight, consumer protection and risk management.
The working group, chaired by David Sacks, an entrepreneur who has been anointed the president's "AI and crypto czar," includes the treasury secretary, attorney general and chairs of the SEC and CFTC.
It's worth noting that the Pew Research Center reported last October that roughly six in 10 Americans have little or no confidence that the current ways to invest in, trade or use cryptocurrencies are reliable or safe. Just 17 percent of those surveyed said they have ever invested in, traded or used cryptocurrencies.
Patti Murphy, self-described payments maven of the fourth estate, is senior editor at the Green Sheet. She also co-hosts the Merchant Sales Podcast, and is president of ProScribes Ink.
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