With new sheriffs in town, payment players can expect tougher scrutiny, lobbyist warns – Digital Transactions

Payments companies have felt increasing regulatory pressure since the inauguration of the Biden administration last year, and now experts who follow developments in Washington, DC, confirm it. After a “relatively light touch” under the Trump administration, “the [regulatory] the pendulum has swung back that way” toward closer scrutiny of payment practices, Scott Talbott, senior vice president of the Washington-based Electronic Transactions Association, warned Thursday.

Among the most active federal agencies currently investigating payments are the Consumer Financial Protection Bureau and the Federal Trade Commission, Talbott told attendees at the Northeast Acquirers Conference in Philadelphia. The CFPB, he warned, is set to expand its authority to tackle what it may see as unfair discrimination in consumer credit. Office issued a statement last month that he will take a closer look at the decision-making of financial firms to attack what he sees as unfair practices in credit, payments and other areas.

“Pay attention to that,” Talbott said. “It’s going to be very problematic. You will be asked to prove a negative, that you did not discriminate.

CFPB under Chopra can require processors to ‘prove a negative result’, says ETA.

It will also be difficult to challenge the bureau on its decisions on the matter, he warned, because it has not published a rule. Instead, he said, “he issued a memo.”

Under the direction of its militant director, Rohit Chopra, the CFPB contacted the companies to gather more information on how they handle complaints and disputes. It was the goal of a recent request the bureau sent to Block Inc., for example, regarding its popular CashApp wallet. The attorneys general of a number of states have joined this request.

These actions follow steps taken by the CFPB to investigate how big technology companies handle consumer payment data and other information and how major payment companies treat users of buy now, pay later programs. . With BNPL products becoming more popular, the regulator is primarily concerned with the extent of debt accumulation, how consumer data is handled, and the potential for regulatory arbitrage, or possible corporate efforts. BNPL to avoid disclosure rules by limiting the number of installments required. .

“If the CFPB finds out someone has done something illegal, they will issue an execution, but we could still see regulation if they find something they don’t like,” Talbott warned.

Meanwhile, the FTC follows a practice of holding processors accountable if it uncovers consumer abuse by merchants. In such cases, it will force processors to “take corrective action”. This, Talbott added, is a practice inherited from Operation Choke Point, a controversial policy carried out under the Obama administration to hold processors accountable for consumer-facing business misdeeds. The practice has gone dormant after the inauguration of the Trump administration.

Lina Khan assumed the chairmanship of the FTC in June after being named to the post by President Joe Biden. Khan previously served as Chopra’s legal counsel in his role as commissioner of the FTC, a position he held until his takeover of the CFPB in October.

Talbott said ETA was also concerned about efforts by some states to pass privacy laws that could complicate payments companies’ efforts to combat criminal activity. “We want to maintain the right to use data to fight fraud,” he said.


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Elaine R. Knight