Payment Processing + Cards

In a case of first impression, the U.S. Court of Appeals for the Ninth Circuit was tasked with determining whether the alleged extracting and retaining of consumer data and tracking of customers using an online payment platform exposes defendants to personal jurisdiction in the state where an online purchase was made. The court concluded it does not. “When a company operates a nationally available e-commerce payment platform and is indifferent to the location of end-users, the extraction and retention of consumer data, without more, does not subject the defendant to specific jurisdiction in the forum where the online purchase was made.”

On November 7, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule with request for public comment to amend existing regulations defining “larger participants” the CFPB supervises by adding a new section to define larger participants that offer digital wallets, payment applications, and similar services.

On October 17, the Clearing House Association, LLC (Association) and National Automated Clearing House Association (Nacha) joined forces to submit an amicus brief in support of a credit union held liable by a district court for a fraud perpetrated by an outside party on the sender of a wire. According to the amici, the district court wrongly held the credit union which banked the beneficiary of the wire responsible for the sender’s losses, even though it had no relationship with the sender. The case, Studco Building Systems US, LLC v. 1st Advantage Federal Credit Union, on appeal before the Fourth Circuit, challenges the district court ruling. The case deals with the liability scheme found in Article 4A of the Uniform Commercial Code (UCC). According to the amici, under the UCC the disappointed originator (the plaintiff) has recourse against the person paid (its own bank), but not against the bank that paid the beneficiary of the wire, with whom the sender has no relationship. The amici argue that “[t]he district court’s opinion muddles these rules, uncaps banks’ liability, and threatens the efficiency of all U.S. funds-transfer systems — not just the ACH networks — to the detriment of every economic participant, down to the consumer.”

The U.S. Supreme Court has granted the petition for certiorari in Corner Post, Inc. v. Board of Governors of the Federal Reserve System (Board), a case where Corner Post challenges a 2011 Board rule that governs certain fees for debit-card transactions. Specifically, the question presented is whether a plaintiff’s Administrative Procedures Act (APA) claim, for statute of limitations purposes, first accrues when an agency issues a rule or when the rule first causes a plaintiff to be “adversely affected or aggrieved.” The Supreme Court’s decision will resolve an ongoing circuit split on the issue.

On September 7, the Consumer Financial Protection Bureau (CFPB) released an issue spotlight focusing on the role that mobile device operating systems play in determining consumer’s payment options. According to the CFPB, “[g]iven the continued shift toward the use of contactless payments on mobile devices like smartphones and wearables, there is now readily available technology for consumers to securely make [point-of-sale (POS)] payments through different apps and services … Any restrictions imposed by the dominant operating systems … will have an outsized effect on access to payments systems and may hinder the development of a truly open ecosystem.”

On August 18, New Jersey Governor Phil Murphy signed into law A4284, which prohibits sellers from imposing certain surcharges for credit card transactions. Specifically, the law prohibits sellers from charging more than what they pay to process credit card transactions. The law also requires sellers to disclose and post notices of the surcharge prior to the consumer incurring the charge.

The Federal Reserve (Fed) has officially launched its new instant payment service, FedNow, which aims to modernize the U.S.’s payment system. As previously discussed here and here, consumers and businesses will be able to send and receive money within seconds, at any time of the day and on any day of the year. This will eliminate the one to three days’ lag time of traditional money transfers, providing the public with more flexibility in managing their money.

On June 29, Connecticut Governor Ned Lamont signed SB 1033, An Act Concerning Various Revisions to the Banking Statutes, into law. As discussed here, with this bill, Connecticut joins several other states that have set strict rate caps on consumer loans, including Illinois, New Mexico, Colorado, and California, and those that expressly provide for a predominant economic interest test for true lender purposes. The law will take effect on October 1, 2023.

On June 20, the Consumer Financial Protection Bureau’s (CFPB or Bureau) Office of Servicemember Affairs published its Annual Report analyzing complaints submitted by servicemembers, veterans, and their families in 2022. The report found that in 2022, servicemembers submitted over 66,400 complaints, representing a 55% increase from 2021, and a 62% increase from 2020. As in prior years, credit reporting remained the top issue for servicemembers, followed by debt collection and credit cards. Nonetheless, much of the report focused on the rising number of complaints from servicemembers related to payment app fraud and recommended steps the industry can take to address this issue.

The Consumer Financial Protection Bureau (CFPB or Bureau) has signaled that it intends to propose a rule that would allow it to exercise supervisory authority over a greater number of nonbank financial companies that participate in the consumer payments market.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the CFPB has authority