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Payments and banking regulators have released a flood of proposed regulations—with more to come—that could reshape the industry and the way consumers access it.
Government-relations teams across the financial-services industry have been hard at work trying to digest what all of these rules could mean for their businesses and the industry. A recap of the rules that have come out since November reveals the complexity of the proposed changes.
On Oct. 25, the Federal Reserve said it would take another look at debit interchange. On Nov. 14, it published a proposed rule that would reduce the interchange paid on debit cards and set up an automatic review cycle, with no public comment going forward. Comments are due by Feb. 12. I covered this in detail in my last column, so I will not spend too much time on it here. But this one could reshape the profitability—and thus the availability—of financial products. This is the first time the board has revisited the debit-interchange fee cap since it was first put in place in 2011.
On Oct. 31, the Consumer Financial Protection Bureau published its proposed rule on open banking. The rule would require banks, credit unions, and other financial-services companies to share account and transaction data with consumers and authorized third parties. It would also require data providers to create developer interfaces to make it easier for third parties to get access to data. Providers are worried about liability for breaches, and the possibility that some companies could become credit bureaus under provisions of the rule. Comments were due Dec. 29.
Then the CFPB released a rule on Nov. 14 that would bring under its supervision large technology companies that offer payment products and handle more than 5 million transactions per year. The Bureau’s stated goals are to make sure these companies are obeying consumer-protection laws and to level the playing field with banks. The CFPB estimates that the rule would bring 17 companies under its supervision, but the rule would affect any companies that reach its thresholds, so these 17 would just be a start. Comments are due on Jan. 8.
As if these were not enough, the regulators included in their regulatory agenda two rules concerning overdraft and insufficient funds that could add to the pile in the New Year. Of course, the agenda does not limit what issues they may take up. It just identifies what the agencies have planned.
The big question is why regulators are jamming all these regulations in at once. The proposed rules would have overlapping effects and could lead to unintended consequences. Industry members have even suggested to me that some of the provisions in these rules should be broken out into separate rulemakings to make sure that they are addressed properly.
One theory is that regulators are trying to get rules in place before the next election cycle to protect the new rules from the Congressional Review Act if control of the government changes. A less charitable one is that regulators released this flood of rules around the holidays to hamper the industry’s ability to respond effectively.
Whatever the reason, we already live in times that are not conducive to good policymaking. Regulators should not exacerbate this fact by releasing proposed rules in a way that hampers public comment. They should consider extending the comment period on the rules that are still outstanding. And they should look for ways to further engage with stakeholders to ensure the final rules achieve the goals of protecting consumers and the safety and soundness of the industry.
—By Ben Jackson bjackson@ipa.org
