Officials Give Some Hints to Acquirers on How To Stay in Washington’s Good Graces

Often regarded as the enemy, officials from the federal government gave some friendly advice to merchant acquirers last week about what regulators are concerned with regarding payments, including mobile payments, prepaid cards, and fraud control.

The recommendations came during a government panel Thursday at the Electronic Transactions Association’s annual conference in New Orleans. There, ETA chief executive Jason Oxman asked several officials a series of questions whose thrust could be summarized as, “How do we stay out of trouble?”

Regarding mobile payments, a major focus of the the Federal Trade Commission is how well providers inform consumers about their rights to dispute charges, according to Patti Poss, chief of the mobile technology unit in the FTC’s Bureau of Consumer Protection.

“We are encouraging companies to provide clear policies,” she said, adding that the FTC also is paying attention to data security and privacy.

The FTC does not regulate banks, but it does have authority over third parties that work with banks, independent sales organizations, and phone companies. The commission in recent years has focused on improved vetting by banks and ISOs of the third parties they often work with, such as telemarketers and other marketing companies. And on Tuesday, the FTC will sponsor a one-day conference in Washington, D.C., to address so-called cramming, in which third parties place unauthorized charges on consumers’ phone bills.

“We’ve put out ideas on what should be done regarding unauthorized charges,” said Poss.

There isn’t, however, one go-to government agency when it comes to issuing rules about mobile payments. While the FTC’s regulatory turf covers non-bank entities, the various bank regulatory agencies and the new Consumer Financial Protection Bureau can be expected to weigh in on mobile payments, too. When Oxman asked who’s in charge of mobile payments, Marla Blow, associate director in the CFPB’s Cards & Prepaid Markets Division, said existing regulations from any number of agencies may be applicable to mobile payments. Mobile payments, she said, “bring more players to the table.”

Blow encouraged her audience of ISOs and acquirers to learn about which laws and regulations may affect them as mobile payments grow because if they run afoul of them, “you will probably be contacted” by someone in a regulatory agency, though which one will very much depend on the circumstances.

The CFPB is trying to get industry to develop account agreements between providers and consumers that are clearly written and free of lawyerly jargon. “We are very open, very interested in working with the industry” on producing clear customer communications, Blow said.

Blow also noted that CFPB by late this year should have issued its draft regulations to extend Regulation E protections to general-purpose prepaid cards. Reg E defines consumer rights, liabilities, and responsibilities in electronic funds transfers.

“We’ve had quite a bit of ongoing dialogue” with industry, and have seen examples of good disclosures of prepaid card fees and terms, Blow said. “When we are ready we will have a very good starting platform,” she said, adding that the CFPB is trying to “minimize unintended consequences” on the prepaid card industry.