MAG Insights

What to Expect in 2023

With such an exciting 2022 for payments policy, it is important to look ahead at what 2023 will bring. In 2023, we will see the enforcement date of the Federal Reserve Board’s (Fed) Regulation II Debit Routing Clarification come into effect on July 1, renewed efforts on the Credit Card Competition Act (CCCA), and regulatory agencies such as the Consumer Financial Protection Bureau (CFPB) will remain hard at work. Below is an update as to what is going on in DC.

Debit Routing in Scope

The market has been quick to react to the Fed’s Reg II Clarification that they released in early October 2022. The date to keep in mind is July 1, which is the deadline for issuers to become compliant with the rulemaking. The Fed stated that issuing banks must enable their debit cards with sufficient technology to allow their cards to be routed in a card-not-present environment.

The Federal Reserve will act as the enforcing agency for issuers’ compliance. The MAG will continue to liaise with merchants and industry partners to gather data on enablement, as well as communicate with the Fed, Federal Trade Commission (FTC), and other governmental officials on compliance in the market.

The FTC Order to Mastercard

The holidays were ripe with regulation as the FTC released an order aimed at Mastercard to end practices of blocking routing through tokenization solutions. This is directly related to the Fed’s Reg II Debit Routing clarification, as it could have been an inhibitor to merchants’ ability to route debit transactions online.

To summarize the issue, Mastercard provides a tokenization solution to merchants, which can offer many benefits to online transactions such as reduced rates of fraud and higher approvals. However, according to the FTC, Mastercard was not allowing other networks access to the non-token information, meaning that debit transactions tokenized with Mastercard were forced to be routed down their network. The FTC is ordering them to allow other networks to access that information to enable merchants the ability to choose which network routes their debit transactions regardless of their tokenization strategy.

In February, the MAG filed comments to the FTC with additional considerations to aid in the final order.

The Credit Card Competition Act

The fall was a busy time on the hill with midterm elections, the debt ceiling, and must-pass legislation taking up a lot of time. Suffice it to say, there was not a vote on the CCCA. Supporters of the legislation expect that this bill will be reintroduced on the Senate Floor in the new Congress. The MAG will continue to update the merchant community on this bill and its movement through the Capitol.

Banks in the sights of the CFPB

In January, Wells Fargo was ordered to pay $3.7 billion, $2 billion of which to customers and $1.7 billion as a fine by the CFPB. The CFPB levied this fine because of improper handling of bank accounts, mortgages, and auto loans that took advantage of consumers.

This ruling is part of a flurry of activity from the CFPB. In 2022, the CFPB released a report on Buy Now Pay Later as a product and how it has affected consumer behavior, as well as how its potentially harmed low-income consumers through high interest rates and fees on the loan structures.

Get Involved!

As you can see, there is a lot happening in payments policy, and we would love to have you engaged in our efforts. In addition to COPs and committees, MAG also hosts a biweekly Payments Policy call for interested merchant members. Please contact Beth Provenzano if you are interested in learning more about any of our engagement opportunities regarding policy.