Capital Corner: High Stakes Card Games in Washington

Provided by John McKechnie

There’s been an uptick in activity in Washington on issues of interest to defense credit unions, particularly the evolving use of payment system technology. Key question: how are Congress and regulators going to adapt to changed consumer needs in a new financial landscape?

The ongoing battle pitting credit unions and banks against the retailer lobby heated up in March. Senator Roger Marshall (RKS), a lead proponent of the Credit Card Competition Act, attempted to attach that legislation to the government spending bill amidst the high-stakes effort on Capitol Hill to avert a government shutdown. Senate leaders turned aside the Marshall gambit late in the evening of March 21—DCUC and several leagues were heavily involved in frantic last-minute lobbying of key Senators against this 11th hour maneuver—but Senator Dick Durbin (D-IL) vows to offer CCCA on every moving vehicle from now on.

Fuel was added to this fire a week later, when Visa and Mastercard agreed to a $30 billion legal settlement with the merchants on credit card transaction fees. On its face the court deal appeared to be a victory for retailers, but they immediately said the settlement didn't go far enough and only lasts 5 years.

Later Durbin was dealt a setback, as his planned April 9 hearing in Senate Judiciary was postponed after Visa and Mastercard executives declined to testify. Durbin’s staff also cited ongoing court review of the settlement as another reason to wait.

---

CFPB on March 5 unveiled a rule capping credit card late payment fees at $8. While on paper the 338-page rule only affects large issuers, defense credit unions and other industry leaders pointed to market pressures exerted by similar fee edicts. The CEO of a $1 billion credit union speculated that “if a large bank is charging $8 per late payment, and we stick to our customary $20, there will be a gravitational pull toward unrealistically lower fees.”

Banks are challenging the new regulation in federal court; a federal judge in Texas was petitioned to stop the rule, but he declined and instead transferred the case to the DC circuit (a venue seen as more friendly to CFPB). In a tartly worded order, the Texas judge told the plaintiffs (sarcastically?) that he “appreciates plaintiff efforts to educate the Court on what they believe the Court does and does not need” but noted he’s been a judge for nearly a decade and can make those decisions on his own.

---

​The Treasury Department has unveiled recommendations on how credit unions and others in the financial industry can manage fraud and cybersecurity risks stemming from artificial intelligence technology.

According to Treasury the regulation of AI in financial services “remains an open question.” The report, which notably doesn’t say what further action regulators or Congress should take, only describes the importance of coordination among state and federal regulators.

Treasury's recommendations range from developing a common AI lexicon, to boosting employee training on AI, to finding ways to help credit unions and small banks with fewer resources leverage the technology. One challenge, the report notes, is that credit unions firms may lack in-house data to build anti-fraud models.

Treasury also floated the idea of “nutrition label” type disclosures to help credit unions and other financial companies understand AI data use.