Gov't Relations Newsletter: Vol 13 Iss 1 "Regulatory Quick Hits to Prepare You for Level Up 25"
Government Relations Newsletter: Vol 13, Issue 1
"Regulatory Quick Hits to Prepare You for Level Up 25"
By: Nicole Meisner, a Member of the APP Government Relations Strategic Interest Group (SIG)
As we head to APP Level Up 25, recent developments in Washington resulting from the change of administration, as well as a flurry of updates by state regulators, have left no shortage of regulatory and policy updates that impact merchant processing and related services. Here are a few issues that have been among our most-discussed topics in recent months and make great conversation starters among your friends at APP.
Trump Administration. The change in administration has led to a significant number of policy shifts at the federal level, including efforts focused on deregulation and narrowing the scope of agencies like the Consumer Financial Protection Bureau (CFPB). We can expect dramatic impacts on the financial services and payments industries. One example is with respect to efforts to deregulate cryptocurrency and digital assets. Another is with respect to AI, whereby President Donald Trump signed an executive order, "Removing Barriers to American Leadership in Artificial Intelligence," seeking to remove regulatory barriers and foster U.S. innovation in AI initiatives. There are also broader policy initiatives, such as the imposition of tariffs, that can have direct and indirect impacts on the payments industry by impacting global supply chains, cross-border transactions, and international payment systems.
Future of the CFPB. As was expected, there has also been significant shakeup at the CFPB under the Trump Administration. On February 1st President Trump removed Director Rohit Chopra and appointed Treasury Secretary Scott Bessent as the acting director. Bessent immediately ordered a suspension of nearly all CFPB activities, including investigations, rule-making, litigation, and public communications. Subsequently, less than a week later, Office of Management and Budget Director Russell Vought assumed the role of acting director. Vought closed the Washington headquarters for a week and directed all CFPB staff to work remotely. He also issued directives to halt virtually all CFPB activities, effectively shutting down the Bureau. He also directed that all effective dates on any final rules not yet in effect be suspended and, through a post on X, announced that CFPB would not be taking its usual draw of unappropriated funding. Legal challenges immediately followed. On February 14th a federal judge ordered the administration to stop efforts to reduce staffing, remove funding, or delete data. While the future of the bureau is still uncertain, President Trump has nominated Jonathan McKernan, a former FDIC board member, as the new permanent head of the CFPB.
Negative Options/Click-to-Cancel. The FTC released its final rule governing negative options (commonly referred to as the “Click-to-Cancel Rule”). The Rule expands the scope of the FTC’s prior Negative Option Rule to cover all forms of negative option marketing, including pre-notification and continuity plans, automatic renewals, subscriptions, and free trial offers including those made in all media forms (via internet, telephone, in-person, and printed material). Among other things, providers of Negative Options are required to provide a simple cancellation mechanism, obtain separate consent of the negative option feature, and make certain disclosures of all material terms of the entire agreement containing the negative option feature. This rulemaking has specific impact on merchant service providers that charge fees on a recurring basis or provide subscription services because the FTC has expressly stated that this rule applies to B2B agreements that contain a negative option (including auto renewing agreements).
Beneficial Ownership/Corporate Transparency Act. After a flurry of legal challenges, the Financial Crimes Enforcement Network’s (FinCEN’s) Beneficial Ownership Information Reporting Rule under the Corporate Transparency Act (CTA) is in effect, again. There have been a series of injunctions which delayed the original effective date of the CTA. But most recently, on February 18, 2025, the U.S. District Court for the Eastern District of Texas granted the government’s motion to stay the nationwide injunction of the CTA that was previously issued. As a result, FinCEN has extended the reporting deadline for all reporting companies to March 21, 2025. FinCEN has also indicated that will assess other options to modify deadlines and reporting requirements based on the risk-level of the reporting entities (i.e., prioritizing those that pose the most significant national security risk.) As a refresher, the CTA was enacted to combat financial crimes (including money laundering, terror financing and tax evasion). The law requires each “reporting entity” to file an electronic report to FinCEN providing information regarding the entity’s beneficial owners. This law applies to most corporations, limited liability companies, limited liability partnerships and other entities that are formed under the laws of a state or Indian tribe or that are formed under the laws of foreign country but registered to do business in the U.S. or any Tribal jurisdiction. Only certain entities that meet specific criteria are exempt.
Larger Participant Rule. In November 2024, CFPB finalized a rule for larger participants of a market for general-use digital consumer payment applications. This rule enables CFPB to examine and have supervisory authority over certain non-bank entities that provide funds transfer and digital app wallet functionalities for consumers’ general use in making payments to other persons for personal, family, or household purposes (for example, digital wallets, P2P apps, payment apps, etc.) and handle more than 50 million of such transactions conducted in USD per year (which was increased from 5 million transactions in the proposed rule). For those entities that meet the definition of a larger participant in this market, those entities are subject to CFPB’s supervisory authority under the Consumer Financial Protection Act (CFPA). CFPB estimated that seven non-bank companies meet the criteria for examination under this Rule at the time the Rule was made final.
Illinois Interchange Law. The Illinois Interchange Fee Prohibition Act (IFPA) was enacted in June 2024 and prohibits financial institutions from charging interchange fees on the tax and tip portions of credit and debit card transactions. This law would entirely upend the payment processing system as we know it and require a complete overhaul of existing systems and processes in order to achieve compliance. The law was scheduled to take effect on July 1, 2025, however, it has been subject to intense challenge. In December 2024, a federal judge issued a partial injunction against the IFPA, temporarily halting its implementation for national banks and federal savings associations. While the preliminary injunction was a win for the payments industry, it did not go far enough, as state-chartered banks and credit unions are still subject to the law. The legal challenges are ongoing and further hearings and decisions are anticipated to determine the law's ultimate applicability and potential modifications. Several other states have followed Illinois’ lead and are now also seeking to enact similar legislation. Significant lobbying efforts are underway to educate state law makers as to why these types of measures will not benefit anyone in the payments ecosystem, merchants included.
State Pricing Disclosure Laws. In July 2024, California’s “Honest Pricing Law” went into effect which requires the inclusion of all mandatory fees in the posted advertised price for goods and services. There has been a number of suits filed (including class actions) alleging violations of the statute – including suits against merchants for the imposition of service fees and add-on surcharges. Similarly, Minnesota’s pricing transparency law went into effect on January 1, 2025. Like California’s law, Minnesota’s law requires business to include all mandatory fees and surcharges in the advertised price of goods and services. The guidance provided by the California regulator is silent as to the impact of the disclosure law on credit card surcharges specifically. However, guidance issued by the Minnesota regulator clarifies that this new law will not broadly prohibit credit card surcharges in Minnesota, provided that such surcharges are structured to be optional, rather than mandatory fees. The guidance explains that if a consumer can reasonably avoid the credit card surcharge by paying with cash (or other payment method), then such surcharge would not be deemed a mandatory fee that is required to be included in the total advertised price. The guidance cautions business to be aware of other consumer protection provisions that still apply to such credit card surcharges, such as clear and conspicuous advance disclosure requirements.
We look forward to seeing you at APP Level Up 25. Be sure to join our Government Relations Strategic Interest Group at 11:55 AM on Wednesday, March 5th, at Level Up 25 for discussion on some of these and various other issues impacting payments regulation, policy, and law enforcement. This panel will be moderated by Chris Geron of Elavon and Co-Chair of APP’s Government Relations Strategic Interest Group and will feature three industry experts and members of the Government Relations Strategic Interest Group who will offer unique perspectives and insights on these topics: Scott Talbott of the Electronic Transactions Association, Ellen Berge of Venable and Co-Chair of APP’s Government Relations Strategic Interest Group, and Deron Hicks, Global Payments.