House to Debate Bill Modernizing ATM Signage Requirements

On Wednesday, June 27, the House Financial Services Committee is scheduled to consider H.R. 4367 which seeks to eliminate Regulation E’s current dual fee notification requirement. If this bill becomes law this year, consumers will not be impacted. Any individual wishing to draw cash at an ATM or inquire on his or her balance will receive the required fee notice on the screen. And, he or she must affirmatively acknowledge the fee before the transaction can be executed.

Prospects for the committee approving H.R. 4367 on Wednesday are strong. The House bill currently has 120 cosponsors including more than half the Financial Services Committee. The Senate companion bill (S. 3204) has 16 cosponsors. The House and Senate bills are enjoying strong, bipartisan support. If the Committee approves H.R. 4367 on Wednesday, it moves to the full House for consideration (mostly likely in July).

In recent years, ATM owners and operators have been beset by a spate of lawsuits from plaintiff attorneys alleging Reg E violations. In many of these cases, unscrupulous individuals are physically removing (vandalizing if you will) the ATM stickers and forwarding photos to these attorneys. Many ATM operators  deploy small fleets of ATMs and face the option of costly litigation or settlement (not a good option either way for small business in America).

Please come back next week for a status on the Committee’s consideration of H.R. 4367 is its next steps along the legislative process.

May Legislative Roundup

There are a wide variety of legislative and regulatory initiatives in which EFTA is involved this spring. These include a movement to change the Electronic Funds Transfer Act to eliminate the requirement that usage fees be posted on the outside of an ATM. This is a vestigial requirement that has outlived its usefulness as modern ATM technology permits a much more detailed, convenient notice on the ATM screen itself as part of an ATM transaction.

Also on the EFTA legislative and regulatory calendar are regulations governing the restrictions on the use of TANF benefits at liquor stores, casinos and adult-oriented entertainment clubs, cybersecurity and overdraft protection.

In an informal interview Kurt Helwig, EFTA CEO, and Dennis Ambach, the organization's senior director for government relations, discuss prospects and strategies for these issues.

We pick up the interview with a discussion about pending legislation in the Senate and House (S. 3204 and H.R. 4367) that would eliminate the dual ATM notice requirement. Can the bills, now under consideration, become law?

Coming to Grips with Overdraft Protection

The Electronic Funds Transfer Association has put together a task force of industry veterans to tackle the tough issue of overdraft protection. The task force's mission is to focus on the legal and operational issues of extending overdraft protection.

In a quick, three-minute video, Kurt Helwig, president and CEO of EFTA talks about the issue.

Spring Legislative Calendar for the Electronic Payments Industry

Dennis Ambach is the senior director for government relations for the Electronic Funds Transfer Association. On a recent visit to Capitol Hill he talked about pending legislative issues of importance to the electronic payments industry.

Time's Running Out to Comment on the Impact of Overdraft Protection

June’s end also marks the end of the Consumer Financial Protection Bureau’s extended comment period on the impacts of overdraft programs on consumers. What’s CFPB’s end game here? Will ATMs and point-of-sale (POS) devices need to deliver a real-time “insufficient funds” warning to consumers before a transaction causing an overdraft takes place?

The CFPB’s notice for comment on overdraft is fairly sweeping in scope. Questions range from quantifying overdraft opt-in rates, the economics of overdraft programs and long-term impacts to consumers. Of particular concern to EFTA members are questions related to consumer alerts and balance information. EFTA membership hits all the touch points of a shared network transaction: the bank, the processor, the network switch, card processor and host processor. If the CFPB were ever to require some type of overdraft notification at an ATM or POS, EFTA members would be in ground zero for compliance.

But, let’s not get too ahead of ourselves here. EFTA will provide the CFPB with comments before the June 29 deadline. Though not finalized, EFTA will emphasize three main points in the comment letter:

·       Most POS devices at retail stores or gas pumps currently lack the ability to deliver any meaningful message to the consumer with respect to a possible overdraft occurrence

·       ATMs are a bit more sophisticated than POS terminals but, again, delivering an overdraft notice message in a shared network transactions (versus on us) is challenging

·       A greater burden will be placed on community and independent banks versus the larger institutions

Once the comment period closes on June 29, the CFPB will take several weeks (probably months) to read over and formulate a proposed rule on overdraft protection. At this writing, the CFPB has received more 235 comments (see them here at regulations.gov). EFTA’s final comment letter will be posted soon.

Restricting Access to TANF Benefits

EFTA and its eGovernment Payments Council have provided their comments to the Department of Health and Human Services on the agency's impending rules for restricting access to TANF benefits. To see the EFTA/eGPC comment letter, click here.

eGPC has spent a great deal of time over the last six months on this issue. This included two nationwide surveys, a white paper, and a webinar. Our goal has been to inform the rules-making process so that the rules developed by DHHS actually accomplish the goals of the legislation in such a way that the administration of public funds for eligible households is not adversely affected.

Our fear has been that without a firm understanding of the problem and how public benefits are administered any resulting restrictions on TANF use may be only sporadically effective and could be discriminatory against TANF participants who play by the rules. Compliance with the Section 4004 requirements, as they're called, could also sap valuable resources from the administration of public aid in many states.

We believe that the most effective way to achieve the goals of the Middle Class Tax Relieve and Job Creation Act (Section 4004) is to give states maximum flexibility in developing and managing their own plans that work best for their states and their program participants This is definitely not a situation where one size fits all.

That's how we see it. Check out our comments and let us know if you agree.

LinkedIn, eHarmony and the Politics of Cybersecurity

Another week, another major data breach hit the airwaves. The most recent causality was LinkedIn. Six million passwords were reportedly hacked. Internet dating Web site, eHarmony, also reported hacked passwords posted online.

Rest assured whenever a major data breach is reported, a slew of Senators and Representatives fire off press releases [old school] and tweets [new school] arguing for their data security bill. In reality, data security has taken a back seat to its bigger and more ominous brother, cybersecurity. For companies in the financial services space, good data security is already the law (Gramm-Leach-Bliley’s Safeguards Rule and more than 45 state data breach notification laws).

As a reminder, the following is a roster of data security bills reported by the Senate Judiciary Committee last September:

·       S. 1151, the Personal Data Privacy and Security Act, sponsored by the Committee Chairman Pat Leahy (D-VT).

·       S. 1535, the Personal Data Protection and Breach Accountability Act of 2011, sponsored by Sen. Richard Blumenthal (D-CT)

·       S. 1408, the Data Breach Notification Act, sponsored by Sen. Diane Feinstein (D-CA)

All three bills would require companies to implement data security programs to protect sensitive personal information as well as setting a national standard for breach notification. S. 1151 and S. 1535 provide for criminal penalties for failing to notify individuals of a data breach. S. 1535 allows for private rights of action against companies failing to notify of a data breach. The Senate Commerce Committee continues to discuss its data security and breach notification bill (S. 1207). On the House side, the Energy and Commerce Committee has yet to schedule a markup and vote on H.R. 2577, the SAFE Data Act authored by Rep. Mary Bono Mack (R-CA). Her subcommittee approved H.R. 2577 in July but negotiations continue on the preemption, data minimization and liability provisions in the bill. It is uncertain whether the full Committee will markup H.R. 2577 this summer.

Even in an active Congress, passing cybersecurity, data security or privacy legislation would all be a tall order. Consensus just does not exist on whether more regulation will be of any benefit. Meantime, companies (especially in financial services and payments) spend great resources (human and capital) to stay one step ahead of the fraudsters, hackers and government officials wanting to punish companies for lax data security.

You’re Going to Need a Bigger Boat

For some reason, I cannot shake this classic line from Jaws (uttered by Chief Brody to Quint upon first seeing the shark) when I read the daily comings and goings of the Consumer Financial Protection Bureau. The question is not who or what the Bureau is attempting to regulate. But, who or what aren’t they wanting to regulate. Or, so it appears.

Like it or not, the Bureau is around to stay. It’s still in its infancy, but growing bigger and more powerful by the day. The Bureau hit a major growth spurt when President Obama recess appointed Richard Cordray to be its first director (controversially I might add). Since January, the Bureau has been one active federal agency. And, it’s not even fully staffed yet.

Here’s a quick, non-exhaustive run-down on the Bureau’s recent activities:

·       Request for Information on overdraft practices

·       Examination of overdraft programs at the largest nine financial institutions

·       Advance Notice of Proposed Rulemaking on General-Purpose Reloadable Prepaid Cards

·       Proposed Rule for Supervision of Nonbanks that Pose Risks to Consumers

·       Proposed Rule on express statutory protections of confidential information in bank examinations

·       Notice for Comment on updating and streamlining regulations

·       Proposed Rule to supervise debt collectors and consumer reporting agencies

Ready to cry “uncle” yet? One can certainly make the case the Bureau is so active because it is so young. But, is haste making waste? Case in point may be the Bureau’s final rule on international remittance transfers issued late last year. The Bureau assumed responsibility for the final rule from the Federal Reserve Board (who had issued the proposed rule). Without going into a detailed analysis of the final rule, many banks providing remittance services are stating the 2013 compliance date for new consumer disclosures and error resolution cannot be achieved. The message appears to be getting through to the Bureau. It may revisit the issue in some fashion.

We ought to be somewhat sympathetic to the Bureau and other federal banking agencies under strain to implement the more than 400 rules and studies required by Dodd-Frank. The Bureau must also find its way in working with the Fed, the OCC, FTC etc on bank examinations and enforcement actions. The Bureau must balance its requirements and obligations under Dodd-Frank against being spread too thin and possibly hurting the financial services industry’s ability to help the economy recover.

Does the Bureau go for the “bigger boat” option or focus on issues beneficial to consumers and the recovering economy? Time will tell.