{"id":3016,"date":"2017-05-17T21:16:41","date_gmt":"2017-05-17T21:16:41","guid":{"rendered":"http:\/\/paymentfac.wpengine.com\/?p=3016"},"modified":"2021-06-15T21:09:01","modified_gmt":"2021-06-15T21:09:01","slug":"new-threats-from-states-and-old-ones-from-the-cfpb-pf-regulatory-responsibilities-arent-getting-any-lighter","status":"publish","type":"post","link":"https:\/\/infinicept.com\/payment-facilitator\/archive\/new-threats-from-states-and-old-ones-from-the-cfpb-pf-regulatory-responsibilities-arent-getting-any-lighter\/","title":{"rendered":"New Threats From States and Old Ones From the CFPB: PF Regulatory Responsibilities Aren\u2019t Getting Any Lighter"},"content":{"rendered":"

Bailey Reutzel <\/em><\/p>\n

As third parties, payment facilitators have a complicated regulatory framework to wade through. <\/strong><\/p>\n

And it\u2019s unlikely to get untangled any time soon, especially as state regulators look to clamp down on a payments industry they don\u2019t fully understand, according to panelists at Payment Facilitator Day during the ETA\u2019s TRANSACT 17 conference. <\/strong><\/p>\n

\u201cEveryone thinks about the federal law…but there are so many threats at the state level,\u201d said Kim Ford, vice president of public affairs at First Data. \u201cWe,\u201d she continued, speaking about payment providers of all kinds, \u201cdon\u2019t get to enjoy preemption from state law like banks do.\u201d<\/p>\n

Prepaid, money transmission, data and cyber security, these are perennial worries, Ford said, but one particular trend in state regulation has her very nervous, and that\u2019s the requirements for real-time sales tax collection.<\/p>\n

The farthest along in this legislative process is Massachusetts, where Governor Charlie Baker has outlined what he describes as a \u201cSales Tax Modernization Timing Change\u201d in his FY18 budget. If the change passes, third-party payment processors would be required to collect and remit sales tax from retailers on all third-party debit and credit card purchases in real time.<\/p>\n

This differs from the way sales tax collection is handled today in that currently, retailers are responsible for collecting and remitting sales tax to the state.<\/p>\n

According to Retailers Association of Massachusetts<\/a>, the administration believes this change could bring in $125 million the year after it\u2019s passed. The change has passed the House of Representatives in the state and is now heading to the Senate for a vote.<\/p>\n

\u201cStates are broke,\u201d said Jonathan Genovese, who handles regulatory compliance and government affairs at Vantiv. \u201cThey\u2019re looking for streams of revenue above and beyond taxes,\u201d and this is one idea that not only Massachusetts has had, but Washington, Connecticut and Puerto Rico have considered as well.<\/p>\n

But this legislation misses something very important about the payments industry, Genovese said. \u201cInterchange doesn\u2019t go to processors or acquiring banks. It goes to the issuing bank. Yet, we\u2019re getting a tax bill for our interchange rates.\u201d<\/p>\n

Plus, said Ford, the legislation also doesn\u2019t take into account just how complex the inner workings of the payment chain are. At the time of the transaction, payment processors would have to identify what the sales tax should be and then either settle with the merchant first and then remit the money to the state, or remit the money to the state and settle with the merchant later.<\/p>\n

\u201cStates love it because they usually don\u2019t know how the industry works and the infrastructure that would have to be changed to do this,\u201d Ford said. \u201cStates that are having budget issues say, \u2018Wow, this sounds really great,\u2019 and it\u2019s seen as a way to catch under-reporters.\u201d<\/p>\n

Ford and others are currently battling the legislature in Massachusetts over this proposed change, and asked others in the state for help.<\/p>\n

She continued: \u201cThis just underscores the fact that the states can be a hotbed of challenging ideas.\u201d<\/p>\n

And, said Genovese, \u201cThe payment industry needs to work together to educate legislators about the complexity of the business. They have no idea how ridiculously complicated it is.\u201d<\/p>\n

So what\u2019s spurred all this unwanted attention on the payments industry?<\/p>\n

Apple Pay and other tech companies moving into the payments space, said Genovese. The attention tech companies and new models like those used by PFs have brought to the industry has made regulators take a closer look, not just for the possibility of revenue but also to protect consumers, he said.<\/p>\n

On the topic of consumer protections, many in the industry wonder whether the leadership and the role of the CFPB might change under the eye of President Donald Trump\u2019s administration. But First Data\u2019s Ford said she doesn\u2019t think the bureau or the bureau\u2019s director, Richard Cordray, is going anywhere any time soon.<\/p>\n

While President Trump had said one of his first actions would be to fire Cordray, \u201cthe rhetoric coming out of the administration has died down a bit,\u201d said Ford.<\/p>\n

And the CFPB is specifically looking deeper into the working of third party payment providers, like PFs that onboard and provide for submerchants, according to the panelists.<\/p>\n

\u201cOne thing PFs don\u2019t appreciate is the extent to which they have to be monitoring their submerchants,\u201d said Holli Targan, a partner at Jaffe Raitt Heuer and Weiss and chairperson of the law firm\u2019s Electronic Payments Group. \u201cNot only do PFs have to comply with all card brand rules, but sometimes PFs are surprised that they have to monitor their submerchants for card brand compliance as well.\u201d<\/p>\n

Plus, PFs have to monitor submerchants for federal and state regulatory compliance with an obligation to file suspicious activity reports (SARs) to FinCEN if they spot something fishy.<\/p>\n

\u201cThe primary thing to remember is that the PF totally takes on all the risk of submerchants, all the liability of submerchants for the transactions that are processed through them,\u201d Targan concluded.<\/p>\n","protected":false},"excerpt":{"rendered":"

As third parties, payment facilitators have a complicated regulatory framework to wade through. And it\u2019s unlikely to get untangled any time soon, especially as state regulators look to clamp down on a payments industry they don\u2019t fully understand, according to panelists at Payment Facilitator Day during the ETA\u2019s TRANSACT 17 conference. <\/p>\n

Prepaid, money transmission, data and cyber security, these are perennial worries, one panelist said, but one particular trend in state regulation has her very nervous.<\/p>\n","protected":false},"author":7,"featured_media":285,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[1015],"tags":[382,452,467],"class_list":["post-3016","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-archive","tag-holli-targan","tag-jonathan-genovese","tag-kim-ford"],"acf":[],"_links":{"self":[{"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/posts\/3016","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/comments?post=3016"}],"version-history":[{"count":1,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/posts\/3016\/revisions"}],"predecessor-version":[{"id":7179,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/posts\/3016\/revisions\/7179"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/media\/285"}],"wp:attachment":[{"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/media?parent=3016"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/categories?post=3016"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infinicept.com\/payment-facilitator\/wp-json\/wp\/v2\/tags?post=3016"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}