MAG Insights

It has been a busy spring for the payments industry in Washington. Competition and swipe fees took center stage at a Senate Judiciary Committee hearing in May, and the Federal Reserve’s public comment period regarding Central Bank Digital Currency (CBDC) closed. In addition, Consumer Financial Protection Bureau (CFPB) Chairman Rohit Chopra continues to make payments a top priority.

Congressional Activity
In May, the Senate Judiciary Committee, chaired by Senator Richard Durbin (D-IL), held a hearing on Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems. Doug Kantor, General Counsel of NACS, and Laura Shapira Kent, Chair and CEO of Giant Eagle, testified at the hearing, sharing the view that credit card networks’ rules that limit competition in payments. Ed Mierzwinski, Senior Director, Federal Consumer Program, U.S. PIRG, testified about the impact of swipe fees on consumers.

Bill Sheedy, Senior Advisor to the Chairman and CEO, Visa, Inc.; Linda Kirkpatrick, President, North America, Mastercard; and Charles Kim, Executive Vice President and Chief Financial Officer, Commerce Bancshares, Inc., rounded out the panel.

This hearing was important for merchants because it was the first hearing in 16 years that the Senate Judiciary Committee has held on swipe fees, which have increased $794 billion since then. Although debit reform was enacted into law over a decade ago, challenges remain with merchant routing rights due to network rules and networks’ use of innovation to limit competition. Senate Judiciary Committee members asked thoughtful questions that allowed the merchant and consumer witnesses to present the facts and make the case for increased competition in credit and debit card systems.

If you have not had a chance to read the witness testimony or watch the hearing, I highly encourage you to do so. The recording and written testimony are available on the Senate Judiciary Committee website.

Federal Reserve Comment Period on Central Bank Digital Currency (CBDC)
In January, the Federal Reserve (Fed) released a discussion paper, Money and Payments: The U.S. Dollar in the Age of Digital Transformation. The Fed requested public comments in response to the paper’s release, and MAG, along with thousands of other individuals and entities, submitted feedback on the potential development of a CBDC. MAG’s comments are available on our website in addition to the Fed’s public record of filed comments.

CBDCs are a hot topic across the globe, and as the Fed evaluates next steps, including their authority to issue CBDCs, MAG staff will keep you apprised of the latest developments.

Consumer Financial Protection Bureau (CFPB)
The CFPB continues its payments activity. The agency recently released its Buy Now Pay Later (BNPL) recommendations following a market monitoring inquiry and public comment period earlier this year.

Their recommendations include:

• lenders furnish both positive and negative data
• standardized BNPL furnishing codes and formats appropriate to the unique characteristics of the product
• consumer reporting companies should incorporate the BNPL data into core credit files as soon as possible and ensure that BNPL data are accurately reflected on consumer reports
• scoring companies and lenders build and calibrate models that account for BNPL loans’ unique characteristics.

Conclusion
There is quite a bit of legislative and regulatory interest in payments – and competition – this year. Merchants are eager to build on the momentum from the hearing and regulatory inquiries to bring more competition and transparency to the payments industry. If you are interested in getting more involved with MAG’s policy efforts, please contact Beth Provenzano.