President Obama signed the Wall Street Reform and Consumer Protection Act into law on July 21, 2010. This regulatory reform law changes the financial services landscape significantly and will result in new regulations that each consumer and business much watch for the foreseeable future.
Many portions of the bill are already effective, while others will be progressively implemented in the coming months and years after a rule-making process. Below are some of the key points to keep in mind about the new laws:
Regulation of Interchange Fees
The Federal Reserve Board was provided regulatory authority to determine PIN and signature debit interchange fee parameters. By April 2011, the Board must establish standards for debit interchange fees, taking into account that the interchange fees must be reasonable and proportional to the cost incurred by each issuer, as well as other considerations, such as the comparison to checks cleared at par and incremental costs. Card issuers with assets less than $10 billion are exempt from the debit interchange fee regulation.
Funds Transfer Alliance gives this a thumbs up, assuming all goes well with the rule-making process.
Exemption for Prepaid Cards and Government Benefit Cards
Interchange fees for prepaid cards and govt. benefit cards are exempt (assuming the prepaid cards are reloadable and not branded or marketed as gift cards). By next summer, interchange fees for prepaid cards will be subject to regulation if an overdraft fee is charged for exceeding the balance on the card or if there is a fee for the first in-network ATM withdrawal each month.
Funds Transfer Alliance likes this rule too... These cards are typically handled by third parties and the rates are usually pretty reasonable.
Regulatory Authority Over Network Fees
The Board may prescribe regulations for any network fee. However, the Board’s authority is limited to ensuring that a network fee is not used to directly or indirectly compensate an issuer for electronic debit transactions and ensuring that the fee is not used to circumvent or evade the interchange fee parameters established by the Board.
The Funds Transfer Alliance says: The protections in this were created with the best of intentions. We'll see how that actually plays out. We have high hopes.
No Exclusive Networks
No issuer or payment card network may restrict the number of networks on which an electronic debit transaction may be processed to only one network or to two or more networks that are affiliated with each other. The Board will biannually post aggregate or summary information on costs, interchange fees and fees associated with authorization, clearing and settlement of electronic debit transactions.
The Funds Transfer Alliance is all about transparency.
No Routing Restrictions
No issuer or payment card network can impose restrictions on how a merchant routes electronic debit transactions.
Openness is the new black.
Discounts for Payments
Effective immediately, merchants will be allowed to offer discounts to consumers in an effort to serve as an incentive for payment by an alternative method (e.g., cash, check), provided the discount/incentive for debit cards or credit cards does not differentiate on the basis of the issuer or the payment card network and the discount/incentive is offered to all prospective buyers and is clearly and conspicuously disclosed.
This has been really confusing for many merchants over the years. The Funds Transfer Alliance is glad we're getting some clarity about how businesses can discount cash payments.
Minimum and Maximum Amounts
Effective immediately, merchants will be allowed to establish minimum transaction amounts for the acceptance of credit cards, provided the minimum does not differentiate between issuers or payment card networks and the minimum amount does not exceed $10 (the Board may increase the $10 minimum by regulation). Additionally, a payment card network may not inhibit a federal agency or institution of higher education from setting a maximum dollar value for acceptance of credit cards to the extent that such maximum does not differentiate between issuers or between payment card networks. No debit or credit cards within a payment card network may be discriminated against on the basis of the issuer of the card.
The Funds Transfer Alliance is wondering how many businesses will establish minimum transactions amounts... Financially it makes sense but not wonderful for every customer.
The information contained herein is not legal advice and is not a comprehensive analysis of issues that may impact your business. Specific questions on how it may impact your products and services should be directed to your legal counsel. Summary courtesy of First Data.
