The New Administration Brings Uncertainty But Also Optimism, Payments Experts Say

By John Stewart
@DTPaymentNews

The new Trump administration injects much uncertainty into U.S. business, with payments being no exception, but a panel of experts on Thursday said the net result should be positive for at least the acquiring side of the market.

“If Hillary Clinton had won, we would have been more on defense,” said Scott Talbott, senior vice president for government affairs at the Electronic Transactions Association, a Washington, D.C.-based trade group for independent sales organizations and payments-technology firms. Talbott spoke as part of a three-person panel addressing regulatory issues at the Northeast Acquirers Association annual meeting in Boston.

While he conceded the absence of policy experience in Trump’s background means “we don’t know what to expect in terms of policy,” Talbott predicted the administration would likely generate less regulation of the payments industry than was seen during President Obama’s two terms. How much less, however, also remains unknown. “We don’t know if it’s going to be a home run, a double, or a single,” Talbott said.

One near-term result is the likely end of Operation Choke Point, a U.S. Department of Justice initiative that attacked illicit businesses by cutting off their access to payments services. The initiative was criticized by many in the payments industry as politically directed at businesses disfavored by Obama administration officials. “That’s probably over” now that Trump officials, including Attorney General nominee Jeff Sessions, are expected to take office, Talbott said.

It’s not all good news for payments executives, as one agency they see as problematic is likely to endure, Talbott told the audience. “The [Consumer Financial Protection Bureau] is the exception to the positive environment,” he said. Created by the 2010 Dodd-Frank Act, the CFPB has rankled financial-services executives because of its independence from Congress and what they see as its tendency to issue burdensome regulation, such as recent rules for prepaid cards.

As recent regulation, however, the prepaid card rules are subject to the Congressional Review Act, Talbott said, and the ETA is working under that law to get resolutions through the House of Representatives and the Senate that would invalidate the prepaid rules. “If we can get a bill through Congress, we can get the prepaid card rules rolled back,” Talbott told the audience.

Another proposal the industry is watching closely is one floated late last year by the Office of the Comptroller of the Currency, an office of the U.S. Department of the Treasury, to create a special bank charter for fintech companies. Panelist Holli Targan, a partner at the Jaffe Raitt Heuer & Weiss law firm in Southfield, Mich. who advises payments companies, warned the audience to weigh carefully both the upside and the downside potential of the proposal.

“The big advantage is [fintechs] will be a bank, they will have a special national bank charter,” she said. That will give them access to the Federal Reserve system, and those offering processing services to merchants will not have to get a bank sponsorship, since they will be the bank. Also, state money-transmitter laws will no longer apply, since they are not applicable to banks. “That will be huge,” said Targan.

The downside, she said, is that “it is going to be very difficult to get” an OCC charter. Applicants will have to meet stringent capital and liquidity requirements, she warned, and will be subject to a variety of banking regulations.

There is also the specter that the special charter could become mandatory for fintechs. “Right now, it’s voluntary. We don’t know how long that’s going to last,” Targan said. “We’re in the exploratory phase.” All in all, she added, the special charter “is not for the faint of heart.”