- ICBA supports subjecting payment cards that contain the same functionality and attributes as traditional checking accounts to the same legal and regulatory framework and supervisory oversight as traditional checking accounts.
- ICBA strongly opposes efforts that, while theoretically intended to prevent unfair, deceptive or abusive payment card acts or practices, would adversely affect community bank payment card issuers and agents as well as their customers. National interest rate and fee caps would directly harm customers with less-than-perfect credit, especially those at the margin, and further reduce competition and stifle innovation in features and functionality.
- ICBA opposes efforts to extend consumer protection provisions to small business payment cards.
- ICBA supports consumer choice in payment card offerings through enhanced transparency, education and fairness; however, ICBA opposes any efforts to create a disclosure regime that would have the effect of limiting choices for consumers across the socio-economic spectrum, or subjecting community banks to legal and compliance scrutiny.
- ICBA supports efforts to better improve payment card security by: migrating from magnetic strip technology to chip technology; developing and using tokenization; improving end-to-end encryption; and improving usage of consumer authentication.
- ICBA strongly opposes efforts to have the government set or limit payment card interchange or other fees, mandate interchange fee disclosure to consumers, or create antitrust exemptions allowing merchants to “negotiate” or “operate” in anti-competitive and collusive ways to the detriment of community banks and their customers. Government intervention should not provide one payment card type advantages over other payment card types.
- ICBA strongly supports a payments card operating environment governed primarily by network rules to ensure a well functioning and balanced payment card system that provides tremendous benefit for community banks, their customers and millions of merchants of all sizes.
Alternatives to Checking Accounts. Non-banks are increasingly partnering with banks to mass market payment cards that have all the attributes of a traditional checking account providing debit card access, deposit acceptance, check-writing, ATM withdrawals, funds transfer, bill payment and deposit insurance. Typically, these payment cards are custodial accounts at FDIC-insured banks and therefore are insured under the FDIC’s pass-through insurance coverage up to the maximum allowed per depositor. ICBA believes that the CFPB and banking agencies should take appropriate steps to ensure that these payment cards comply with applicable laws and regulations.
Consumer Protection. Community banks provide a menu of payment card services to execute the exchange of monetary value. Community banks strive to balance the mandate to maintain transparent, safe, sound and profitable payment card programs with the needs of financially-varied customer bases.
Congress and the federal agencies must exercise caution in ensuring that efforts to establish and maintain an environment protecting consumers from unfair, deceptive, or abusive acts or practices does not unnecessarily impede community banks’ ability to respond flexibly to changing markets and consumer needs. A well-informed consumer has the ability to shop with his or her feet, a free-market factor that benefits community banks that thrive on successful relationship banking.
National interest rate and fee caps would reduce competition as small issuers without scale may exit the business if they cannot compete with larger scale issuers on price alone. Efforts to place caps on rates and fees would also force small issuers to cut off credit to those most in need, and would likely raise the cost of credit to all other borrowers.
Congress and the federal agencies should remain mindful that community bank payment card programs need to be profitable. If this balance is not maintained, community banks will give greater consideration to discontinuing various products, particularly credit cards, which would result in further consolidation of the industry and fewer choices for consumers. Policies that generate more compliance costs for community banks will not benefit consumers.<,/p>
Payment Security. Payment card system stakeholders – networks, merchants, card issuers, and cardholders – are concerned about the growing security risks and the need to move to more sophisticated and secure technology such as chip, tokenization, end-to-end encryption and PIN authentication. But re-engineering a payments system is not easy task as there are many players that need to collaborate, from the card networks and processors to the bank issuers and merchants. ICBA is participating actively in this migration by conveying the community bank perspective to all stakeholders and communicating the implications of these changes to community banks and their customers.
Interchange – Merchants are now seeking a U.S. Supreme Court review of the appeals’ court March 2014 decision to uphold the interchange fee standards contained in the Federal Reserve’s Regulation II, Debit Card Interchange Fees and Routing. Merchants are not seeking review of the networking exclusivity provisions. ICBA is an active participant in a broad coalition of financial institution trade associations opposing government intervention in the debit interchange market. The coalition has filed friend-of-the-court briefs and participated in oral arguments at each stage in the judicial process and will continue to do so.
The verdict is still out as to whether the small debit card issuer exemption from the interchange fee cap is indeed shielding community banks from the negative impact of government price-fixing. Merchants are vigorously pursuing various legislative strategies to further shift their payment card interchange costs to consumers, and are likely to continue to push Congress to regulate credit card interchange fees and further weaken payment network rules in the future. If merchant efforts are successful, community banks and their customers will pay more to provide merchants, especially larger ones, with those benefits. ICBA remains actively engaged in the legislative, regulatory and judicial processes and continues to work to prevent large retailers from further damaging the electronic payments system.