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MasterCard Worldwide has announced that Swiss Bankers Prepaid Services Ltd. will become the first financial institution to use the global prepaid transaction processing capabilities of MasterCard Integrated Processing Solutions (IPS), the debit and prepaid processing platform introduced earlier this year. READ MORE »
The Federal Reserve Board also announced today that it is separately proposing rules to protect consumers that use overdraft services offered by their bank. The rule solicits public comment on proposed amendments to Regulation E (Electronic Fund Transfers) intended to provide consumers a choice regarding their institution's payment of overdrafts for automated teller machine withdrawals and one-time debit card transactions. The Board is proposing two alternative approaches to providing consumer choice, including a proposed requirement that would require institutions to obtain consumers' affirmative consent (or opt-in) before any overdraft fees or charges may be imposed on consumers' accounts. The comment period for the Regulation E proposal ends 60 days after publication in the Federal Register.
In a related move, the Board is adopting final amendments to Regulation DD (Truth in Savings) to address depository institutions' disclosure practices related to overdraft services. The effective date for the final rules adopted under Regulation DD is January 1, 2010.
As expected, the Federal Reserve Board on Thursday approved final rules that it said "would better protect credit card users by prohibiting certain unfair acts or practices and improving the disclosures consumers receive in connection with credit card accounts and other revolving credit plans."
"The revised rules represent the most comprehensive and sweeping reforms ever adopted by the Board for credit card accounts," said Federal Reserve Chairman Ben S. Bernanke. "These protections will allow consumers to access credit on terms that are fair and more easily understood."
"Our intent is to increase transparency and fairness in how credit card and deposit accounts operate, thereby enhancing competition and empowering consumers to better manage their accounts and avoid unnecessary costs," said Federal Reserve Governor Randall S. Kroszner. "The rules represent a significant step forward in consumer protection. By ensuring fairness and making credit terms easier to understand, these safeguards should allow more consumers to benefit from using credit."
The Federal Trade Commission has issued a report titled "Security in Numbers - SSNs and ID Theft" 
recommending five measures to help prevent Social Security numbers from being used for identity theft. Principal among the report’s recommendations is that Congress consider taking action to strengthen the procedures that private-sector organizations use to authenticate their customers’ identities.
READ MORE »
The Canadian Restaurant and Foodservices Association (CRFA) has announced that it "strongly supports Alberta Premier Ed Stelmach's recommendation to the Prime Minister to limit credit and debit processing fees. The recommendation was part of the Premier's suggested measures for inclusion in the 2009 federal budget." READ MORE »
The Office of Thrift Supervision is the first of the three US financial regulatory bodies to adopt new rules prohibiting certain unfair credit card practices. The Federal Reserve Board and the National Credit Union Administration are expected to approve the same changes.
"The rule bans practices often cited as unfair to consumers, such as raising the interest rate on an existing credit card balance when the consumer is paying the credit card bill on time. ... The rule requires that consumers receive a reasonable amount of time to make their credit card payments, prohibits payment allocation methods that unfairly maximize interest charges and, in the subprime credit card market, limits fees that reduce the credit available to consumers."
The rule takes effect July 1, 2010, - although the OTS says it "encourages institutions under its supervision to make their best efforts to conform as soon as practical, particularly to the provisions related to high-fee cards."
A summary of the rule and the full text of the rule are available online.
On the Digital Money Forum blog, Dave Birch writes about "Movers and Shakers" - asking just who is going to be the game changer with respect to retail payments innovation. He notes that banks are pretty preoccupied at the moment with higher priority issues. [Editor's note: You can find more posts from other payments and banking-related blogs on this page.]
eCommLink, and Rechargeplus Global have announced a "global alliance that combines the companies’ prepaid debit platforms with mobile and merchant applications to serve the needs of the growing international money transfer market. Hundreds of billions of dollars are sent home each year by migrant workers, often to places with little or no banking and technology infrastructure. Providing a means for the recipient to access and utilize these funds can be a challenge, especially when there may not be a local bank or money transfer store for hundreds of miles." READ MORE »
The Federal Reserve Bank of Chicago's latest Profitwise News and Views addresses the subject of immigrant participation in mainstream (retail) financial service markets. "Immigrants tend to be less "banked" (i.e., use alternative and more costly financial service providers, such as check cashers and payday lenders) than the native population across income levels, though transaction account use correlates positively with higher income. The 2000 Survey of Income Program Participation reveals that 53 percent of Mexican immigrants and 37 percent of other Latin American immigrants remain unbanked, compared to about 9 percent of the total U.S. population." The article was written by Katy Jacob and Carrie Jankowski.
Discover Financial Services has reported financial results for its fourth quarter 2008 ending November 30. Discover card sales volume declined 2% to $22 billion during the quarter as compared to 4Q2007. The net chargeoff rate increased to 5.48%, up from 3.85% in the same quarter last year. The company said it expects chargeoffs to increase to over 6% in the first quarter 2009.
[Update: Seeking Alpha has made available a transcript of today's Discover conference call.]
In an article titled "Recession, New Rules Trim Cards' Mass Appeal", Maria Aspan writes for the American Banker (subs. reqd.) about the changes made by US credit card issuers in 2008 - as they raised interest rates, lowered credit limits and pulled back on marketing as credit chargeoffs mounted.
Aspan writes: "[Credit card] issuers' baseline standards have changed, and they will be marketing to a much smaller pool of consumers for the foreseeable future. This shift, combined with consumers' newfound economic caution, is expected to magnify the long-running trend for debit card growth to outpace that of credit."
Starbucks Coffee Company has announced that beginning January 3, customers will have the opportunity to make their purchase at Starbucks stores (RED) when they use the new (STARBUCKS)RED Card, a stored value Card that can be given as a gift or purchased for personal use at participating stores in the U.S. and Canada. Starting January 3 and continuing through December 31, 2009, every time a customer uses this Card to make a purchase at Starbucks, five cents will go directly to the Global Fund to help save lives in Africa. READ MORE »
The Economist reports on research by Warwick University psychologist Neil Stewart finding that the suggestion of a minimum payment amount on credit card bills resulted in cardholders paying less than they otherwise might have - resulting in them paying even more interest charges overall.
In a story titled "Credit card holders livid about 'rate-jacking'", CNN looks at cardholder reactions to changes in the interest rates on credit card accounts - in particular by Citibank. "Citigroup seems to be the target of most bloggers' venom -- partly because Citigroup issues so many credit cards and partly because Citi began sending the notices at about the same time it was getting a $20 billion, taxpayer-financed government bailout."
See alto this story on Bloomberg.com: Credit-Card Users Feel Pain as Banks Reap Gain From U.S. Cash and Michelle Singletary's column in the Washington Post: Overcharged and Over a Barrel.
Note: Throughout the day, as Payments News happens, this post is updated. For job opportunities available for payments professionals, visit PaymentsJobs.com. Employers looking to hire payments professionals can post their job openings there as well.
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