Over on our PaymentsViews.com blog, Glenbrook's Carol Coye Benson reflects on yesterday's announcement by the Federal Reserve of new rules prohibiting banks from charging overdraft fees on debit card and ATM transactions without first obtaining consumer opt-in. Carol speculates on what retail banks will do to deal with the potential loss of overdraft fee revenue that could result.

The Federal Reserve Board has announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act and are effective July 1, 2010. READ MORE

The Network Branded Prepaid Card Association (NBPCA) has released a statement in response to the introduction of the Restoring American Financial Stability Act of 2009 by Senator Chris Dodd (D-CT):

"The Network Branded Prepaid Card Association appreciates the efforts of Chairman Dodd and the Senate Banking Committee to better protect consumer interests. The NBPCA and its members are committed to working with them as this process goes forward. It is absolutely critical that any new regulations not limit access to unique financial products such as prepaid cards, which have become a key tool of financial inclusion for the millions of unbanked and underbanked U.S. consumers who rely on them. READ MORE

On Friday, the Federal Reserve released its G.19 Consumer Credit report for the month of September 2009 showing that consumer credit outstanding overall decreased at an annual rate of 7.2 percent in August 2009. Revolving credit outstanding decreased at an annual rate of -13.3 percent, and nonrevolving credit decreased at an annual rate of -3.7 percent.

The FBI issued a press release earlier today highlighting concerns about an increase in ACH-based fraud targeting online banking credentials of small businesses, governments and school districts.

From the press release: "Within the last several months, the FBI has seen a significant increase in fraud involving the exploitation of valid online banking credentials belonging to small and medium businesses, municipal governments, and school districts. In a typical scenario, the targeted entity receives a “spear phishing” e-mail which either contains an infected attachment, or directs the recipient to an infected website. Once the recipient opens the attachment or visits the website, malware is installed on their computer. The malware contains a key logger which will harvest each recipient’s business or corporate bank account login information. Shortly thereafter, the perpetrator either creates another user account with the stolen login information or directly initiates funds transfers by masquerading as the legitimate user. These transfers have occurred as both traditional wire transfers and as ACH transfers." READ MORE

One hundred percent of credit cards offered online by the leading bank card issuers continue to include practices that will be outlawed once legislation passed in May takes effect next year, according to a new report by the Pew Health Group’s Safe Credit Cards Project titled "Still Waiting: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect".

The report also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined. With the Federal Reserve currently developing rules to ensure penalty charges are “reasonable and proportional” as required under the Credit CARD Act, the report also includes policy recommendations for regulators. READ MORE

The U.S. Government Accountability Office (GAO) has released a report, "Credit Cards: Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Market Place and Use of Technology".

The GAO said it was asked by Congress to examine (1) the federal and state consumer protections and enforcement responsibilities related to the credit card debt collection; (2) the process and practices involved in collecting and selling delinquent credit card debt; and (3) and issues that may exist related to some of these processes and practices.

The Payment Systems Board of the Reserve Bank of Australia has published its Annual Report 2009. The report contains lots of interested data and graphs on payments behavior, interchange fees, merchant service fees, etc. in Australia.

Senator Chris Dodd has announced the The Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act, a new bill he is introducing to "protect Americans from excessive checking account overdraft fees." READ MORE

In a post on his Payments Industry Regulation blog titled "Note to Congress Re: CFPA Legislation - Clean up Your Act", Broox Peterson writes that, with the House Committee on Financial Services to begin mark-up of the bill tomorrow, "now is the time to point out a couple of flaws in the bill I hope are fixed during the mark-up. I am not advocating for or against creation of the CFPA, just expecting Congress to make the effort to draft legislation that does not lead to unnecessary confusion and bad policy."

The Electronic Payments Coalition has commented on the legislation pending in the US House that would impose new limits on interchange fees and practices.

"H.R. 2382 is one of the most egregious assaults on consumer protection that this country has seen in some time. Disguised as a measure to allow for cash discounts - something that is already allowed by federal law and by all card network contracts - the bill would instead open up the door for bait-and-switch advertising schemes, charging additional checkout fees at the register, and discrimination against certain card holders. The bill is chock full of provisions that mean one thing: consumers will pay more so merchants can pay less. Bottom line - retailers don't want to pay their fair share for a service that brings them more sales and higher profits - and want their customers to pick up the tab instead." READ MORE

In an article titled "In House, a Bid to Hasten a Credit Card Law", Reuters (via the New York Times) reports that Representative Barney Frank, Democrat of Massachusetts and Chairman of the House Committee on Financial Services believes that "recent actions by credit card issuers prove that lawmakers should move up the date of new restrictions on interest rates and fees." Frank's committee held a hearing on the matter earlier today in Washington - along with a look at credit card interchange fees.

The House Committee on FInancial Services is holding a hearing today on interchange fees - and, specifically, H.R. 2382, the Credit Card Interchange Fees Act of 2009. The website has been updated with today's witnesses and, where available, their prepared testimony.

The latest Federal Reserve G.19 Consumer Credit report is out for the month of August 2009 showing that consumer credit outstanding overall decreased at an annual rate of 5-3/4 percent in August 2009. Revolving credit outstanding decreased at an annual rate of 13 percent, and nonrevolving credit decreased at an annual rate of 1-1/2 percent. The rate of decline in revolving consumer credit is the steepest reported in several years.

The US House Committee on Financial Services has scheduled a hearing this Thursday on two pieces of legislation: H.R. 2382, the Credit Card Interchange Fees Act of 2009 and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. HR 2382 would prohibit interchange differentials between premium and non-premium payment cards, merchant display of prices, etc.

The Federal Reserve Board has proposed rules amending Regulation Z (Truth in Lending) "to protect consumers who use credit cards from a number of potentially costly practices."

"This proposal is another step forward in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly," said Federal Reserve Governor Elizabeth A. Duke. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts." READ MORE

In an article titled "Congress Seeks Faster Implementation of New Credit-Card Rules", Mary Pilon and Jane Kim write for the Wall St. Journal about pressures building in Congress to accelerate the implementation of the rest of the Credit Card Act's changes from February to December.

Writing on his Payments Industry Regulation blog, Broox Peterson takes a look at the proposed revisions to H.R. 3126 suggested by Barney Frank (according to a Reuters report) to address concerns about that legislation and the creation of the proposed Consumer Financial Protection Agency.

Peterson writes: "In an important respect the proposed revisions seem quite inadequate, and that is in clarifying the scope of jurisdiction of the CFPA - in other words, who is subject to CFPA jurisdiction (and why)?"

The Federal Reserve is out with its latest G.19 Consumer Credit report for July 2009. According to the Fed, US consumer credit decreased at an annual rate of 10-1/2 percent in July 2009. Revolving credit decreased at an annual rate of 8 percent, and nonrevolving credit decreased at an annual rate of 11-3/4 percent.

Action to prevent criminals abusing new mobile phone technology, which allows them to be used like debit, credit and pre-pay cards, has been agreed by the UK government, mobile phone and card payments industries, Home Office Minister Alan Campbell announced today. READ MORE

The Federal Reserve Bank of Atlanta has just posted two openings on PaymentsJobs.com:Sr. Payments Risk Analyst and Payments Risk Analyst.

Both of these positions support the work of the Atlanta Fed's Retail Payments Risk Forum - see the Portals and Rails Blog.

For more career openings for payments professionals, visit PaymentsJobs.com. To quickly list your job openings, click here.

The Federal Reserve has published a new staff working paper titled And Banking for All? by Michael S. Barr, Jane K. Dokko, and Benjamin J. Keys. From the abstract: "This paper presents data from a new survey of low- and moderate-income households in Detroit to examine bank account usage and alternative financial service (AFS) products. We find that for the vast majority of households, annual outlays on financial services for transactional and credit products are relatively small, around 1% of annual income. This estimate is lower than those extrapolated by previous work using the posted fees of financial services alone, suggesting that LMI households do not always choose the most expensive financial services option."

The New York Times today has an editorial titled "Debit Card Trap" on the subject of the overdraft fees that many banks collect on debit card transactions when there aren't sufficient funds in the consumer's checking account. The Times cites research by Moebs Services finding that banks in the US "will earn more than $38 billion this year from overdraft and bounced-check fees. Moebs also estimates that 90 percent of that amount will be paid by the poorest 10 percent of the customer base."

The Times is urging that regulators adopt new rules - currently under consideration by the Fed - that would require consumer opt-in and would require notification in real-time when a debit card charge is going to result in an overdraft fee being charged.

The Federal Reserve Bank of Cleveland will be holding a conference titled "Consumer Protection in Financial Product Markets" on Friday, September 11, 2009.

From the abstract: "The financial crisis has ignited a call for changes in how consumers are protected in markets for financial products. Recently proposed legislation underscores both public sentiment and the government’s commitment to meaningful reform of the existing consumer protection regulatory regime. As an optimal regulatory environment requires a balance between providing consumer protection and consumer choice, careful consideration must be given to the proposed reforms." READ MORE

The Federal Reserve Bank of Chicago has published "Payments Pricing: Who Bears the Cost?—A conference summary" by Katy Jacob, policy research specialist, Financial Markets Group, Carrie Jankowski, business economist, Financial Markets Group, and Anna Lunn, associate economist, Financial Markets Group.

"As consumers and merchants increasingly adopt electronic payments, the pricing of these services has generated substantial scrutiny by public authorities around the world. To discuss these developments and related issues, the Federal Reserve Bank of Chicago hosted its ninth annual Payments Conference on May 14–15, 2009."

The Federal Reserve's G19 Consumer Credit report today found that revolving consumer credit decreased at an annual rate of 6.8% in June. For the second quarter, revolving consumer credit declined at an annual rate of 8.2%.

The Office of the Comptroller of the Currency has sent out a reminder to CEOs of national banks in the US reminding them that, effective August 22, 2010, banks must conduct the periodic reviews required by theCredit Card Accountability Responsibility and Disclosure Act of 2009 on any accounts on which the APRs were increased on or after January 1, 2009. To fulfill their obligations, banks "must maintain and have available such information concerning APR increases for such accounts as needed to enable them to conduct the required reviews."

The Federal Reserve Board has approved an interim final rule amending Regulation Z (Truth in Lending) to require creditors to increase the amount of notice consumers receive before the rate on a credit card account is increased or a significant change is made to the account's terms. The amendments also allow consumers to reject such increases and changes by informing the creditor before the increase or change goes into effect. READ MORE

The US House Committee on Financial Services is holding a hearing in Washington today on the Obama administration's financial regulatory reform proposals. A number of speakers from the banking industry are testifying at the hearing.

Senator Chris Dodd has sent a letter to to the Chairman of the Federal Reserve and the heads of key regulatory agencies "directing them to write and enforce robust rules to implement new requirements that credit card companies review rate increases on their customers implemented since January 1st of this year."

Dodd reminds the regulators that the recently enacted Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) includes a provision that will require credit card companies to review every six months any account where the interest rate has been raised since January 1, 2009 and reduce the rate if the customer has become less of a credit risk or the circumstances that warranted the increase are no longer present.