A View from Washington: Ten Years and Beyond

A View from Washington: Ten Years and Beyond

A View from Washington: Ten Years and Beyond

Scott Talbott

Scott Talbott

Scott Talbott, J.D., C.P.A., is SVP of government affairs at the Electronic Transactions Association. He is an experienced policy advocate and communicator with two decades of experience in Washington.

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Over the last 10 years, the payments industry has enjoyed a period of unprecedented change and expansion. The influx of technological innovation has introduced new products and services, available to more Americans and consumers around the globe. It has led to new ecosystem security efforts like EMV chip cards and tokenization, and new products like P2P, reloadable prepaid cards, and online small business financing options. These innovations have helped identify and reduce fraud, and have made payments and financial services more accessible.

But technological innovation notwithstanding, policymaking over the last decade has significantly altered the landscape for our industry as well. Just 10 years ago, we were on the precipice of the Great Recession. And since then, we have seen legislation and regulations that have altered the landscape in payments.

Let's take a look at some of the most important policy changes over the last 10 years that have changed the payments industry:


Credit Cardholder Bill of Rights
In response to the financial crisis, federal lawmakers in Washington placed new provisions on credit and gift cards designed to better inform and protect Americans against misinformation and practices deemed abusive. For example, the law placed limitations on interest rate increases and required clearer due dates and times and disclosure of minimum payment amounts. These pro-consumer provisions have strengthened consumers' use of credit and gift cards.


The Durbin Amendment
Arguably the most significant policy change in the last 10 years, the Durbin Amendment to the Dodd-Frank Act set caps on debit interchange rates for large banks and imposed routing and exclusivity provisions on all debit cards. These provisions were hailed by merchants, who were enthusiastic about the cost of accepting cards decrease. It remains one of the most impactful — and hotly contested — payments industry policies of the last decade.

"Just 10 years ago, we were on the precipice of the Great Recession. And since then, we have seen legislation and regulations that have altered the landscape in payments." -Scott Talbott


Operation Choke Point
Operation Choke Point was an effort to set policy by a previous administration that aimed to throttle politically un-favored, but legal, merchants by 'choking off' access to the payments system. The goal was to put pressure on the payments industry by making it difficult for them to continue to serve the politically disfavored merchants. ETA and its members pushed back, arguing that the industry follows the law and should be able to serve legal merchants without risk of punitive action from the federal government. If Congress wants to change the law and make the activity illegal, the ETA argued, it can. But the overbearing regulatory structure of Operation Chokepoint was not a good way to set policy. In 2017, the Department of Justice halted Operation Choke Point.


The CFPB (Consumer Financial Protection Bureau) Prepaid Rule
Prepaid accounts are one of the fastest growing consumer financial products in the United States. They allow almost 70 million Americans, especially low- and moderate-income Americans, to participate in the modern financial services ecosystem. The amount loaded on prepaid cards grew from about $1 billion in 2003 to nearly $65 billion in 2012. This amount is expected to reach $116 billion by 2020. The CFPB finalized new regulations this year. The regulations impose requirements for the treatment of funds on lost or stolen cards, error resolution and investigation, fee disclosures, access to account information, and it greatly restricts overdraft features if offered in conjunction with prepaid accounts.

Telephone Consumer Protection Act (TCPA)
Long heralded as a law to protect against unwanted dinnertime telephone solicitations, the TCPA was a pro-consumer law. But in recent years, technology has outpaced the TCPA and created many issues for the payments industry. Payments companies routinely call consumers to alert them to important changes to their account in instances of fraud, for example. Current TCPA jurisprudence exposes them to tremendous risk in doing so, a loss for both consumers and payments companies.

However, a Court of Appeals ruling in March helped to rectify some outdated features of the TCPA by clarifying the idea of revocation of consent, reopened the discussion to reduce the types of calling equipment that fall within the TCPA's restrictions, and struck down overly restrictive rules related to the ability of a consumer to revoke consent given to a payments company to call the consumer. This court decision shows how outdated laws can serve as a hindrance on the development of new technology and the ability of the payments industry to serve consumers and merchants.

Sports Gambling
This summer, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA). The law made it unlawful for states other than Nevada to authorize sports gambling. The decision opens the door to states to allow for an expansion of legalized betting on college and professional sports. As expected, the decision set off a rush among states to put plans in place. New Jersey and Mississippi have already passed laws permitting sports betting. While this decision could revolutionize spectator sports, its effect on the payments industry will be substantial. While this one court decision is more about sports than payments, this change in policy will open a new avenue for business and innovation in the payments industry.

Legalizing Recreational Marijuana in the States
Since 2012, many states have legalized marijuana for medicinal and recreational use. Our neighbors to the north in Canada made recreational use legal in the entire country. While many see these policy changes as an opportunity for the payments industry to serve a new class of merchants, problems persist.

Marijuana may be legal at the state level, but it is still illegal at the federal level as a Class 1 narcotic under the Controlled Substantives Act. This means that the payments and banking industries cannot legally process electronic payments for the purchase of marijuana. This has led to legal merchants selling marijuana being forced to deal in cash. It's quite an odd step backwards in our economy's march toward universal electronic payments, and a reminder that sometimes policy can serve to restrict the payments industry's ability to help the economy.

Coming Up Next

Any review of the past is complemented by a look to the future. Here's what could define the next decade:

  • Modernizing of existing policies to regulate fintech
    It's ultimately inevitable — the technological developments of the payments industry have outpaced policy and now policymakers are considering how best to regulate the modern payments landscape. A law like TCPA is a perfect example, but there are many more opportunities in mobile banking, online small business lending, fintech payment tools and more. A fresh look at the regulatory structure could increase the accessibility and utility of the payments ecosystem.

  • Federal fintech charter
    The Office of the Comptroller of Currency (OCC) is considering issuing a special national bank charter for fintech companies. This charter would offer a number of public policy benefits for consumers and small business proprietors that increasingly rely on these innovative products and services.

    The OCC's decision to consider issuing charters to fintech companies will also further the industry's existing efforts to expand consumer access to affordable financial products and services. Similarly, creating a level playing field for these types of services will increase competition in the market and free up the industry to focus, to the greatest extent, on developing cost-efficient, inclusive products and services. It is important to recognize, however, that these benefits are most likely to be realized if the OCC tailors its application and evaluation process for the fintech industry. As a starting point, a fintech company that obtains a bank charter will have the benefit of a regular and consistent regulatory framework in which to provide services to customers.

Looking Ahead

As we look back on the last decade, policymakers have had tremendous influence on the payments industry. As we look forward to the next decade and beyond, we will see this continue as policymakers look to catch up with the industry's fintech-driven innovations. Past, present or future, all this leads us to the important conclusion that it is crucial for the payments industry to be involved with policymaking.

The statements and opinions of the writer do not necessarily reflect those of TSYS.

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Scott Talbott

Scott Talbott, J.D., C.P.A., is SVP of government affairs at the Electronic Transactions Association. He is an experienced policy advocate and communicator with two decades of experience in Washington. Talbott has represented the largest financial services firms in the country before Congress and federal regulators, most notably during the fiscal crisis. He is also an expert on communication, appearing regularly on national and international media. He has been called the voice of the financial services industry and one of the most recognizable faces in the industry.

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