The Electronic Transactions Association was one of a legion of organizations representing commercial interests that endorsed a recent letter to the United States Senate urging it to block the creation of the Consumer Financial Protection Agency.
The proposed agency is at the heart of the Wall Street Reform and Consumer Protection Act ratified by the U.S. House of Representatives in December 2009, a bill the Senate is now deliberating.
"First, we'd like to make clear that we agree reform is necessary and firmly support enhanced consumer protection ... however, we believe the CFPA, both in form and substance, is not the correct approach because it will have severe unintended consequences for consumers, small businesses, and the economy," the letter states. The letter is endorsed by over 30 organizations representing a wide array of business interests.
According to Mary Bennett, Director of Government and Industry Relations for the ETA, "the driving force" behind the letter was the U.S. Chamber of Commerce. She said the ETA objects to the proposed Consumer Financial Protection Agency on a number of grounds. For starters, she said, the agency would add a superfluous layer of regulation to the Federal Trade Commission, which already regulates commerce.
"Much of our business is currently regulated by the FTC, so the creation of the CFPA would put a whole new, second set on top of the current FTC set, so we'd now come under two regulators instead of one," she said. "The problems that can pose are incredible. Who do you listen to?"
She added that while the law's broad language makes it applicable to almost every business sector in the country, the issue of consumer protection does not apply to most of the payments industry, where dealings are generally between businesses and do not involve consumers.
"It is the Consumer Financial Protection Agency, presumably to regulate and examine financial products offered to consumers, and we don't do that," she said. "If you are a processor, if you are an ISO, you don't have any interaction with the consumer, don't offer them any product, don't have a contract with the consumer, ever. So our argument is that creating [the CFPA] is a bad idea, yes, but even if it is created we shouldn't be in it ... [the legislation] is overreaching and overbroad in that it does not exclude anyone; it attempts to reach every aspect of the domestic economy."
Payment attorney Adam Atlas agreed that the CFPA would be "redundant" in an industry that is already regulated - and largely self-regulated by card brand rules that call for fines and other penalties when contracts are breached or lack transparency.
"There are very important public interests to be served by regulation ... but I don't think this proposed legislation is necessary from our industry's perspective. We're already self-regulated and we don't need it," he said. Atlas added that additional regulation could hurt competition and force out small acquirers that lack the resources to comply with a larger, more complex regulatory framework. He also said it would be a stretch to apply consumer protection laws to ISO-merchant dealings, even those involving small businesses.
"There's a very big difference between a business and an individual," he said. "There are some states and courts that interpret business as being as vulnerable as individual consumers, but I still think our industry is mostly [defined as] a business-to-business environment. It's less likely to be impacted by this than businesses selling to individual consumers like those selling credit cards, mortgages and car loans."
Atlas said it would be hard to predict the legislation's prospects for passage, but that "I've got to think the letter will have an impact. ... It wasn't just signed by the ETA, it was signed by a whole long list of organizations."
Payment attorney Theo Monroe also voiced strong concerns about the proposed CFPA, but noted that the questionable practices of some card issuers have put the entire payments industry in the crosshairs. "It's understandable why everybody is joining together to oppose this," he said. "But the [payments industry] shouldn't be surprised after all the shenanigans on the issuer's side in the last 10 years that Congress wants to take a whack at us, nor is it surprising that the legislation took on a life of its own."
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