STATE GOVERNMENT RELATIONS
New Albany Regional Meeting
One regional meeting remains in New Albany, rescheduled for Oct. 17. Join us to facilitate grassroots communication between the bankers we serve and the legislators who serve our state. The meeting will include an hour-long update on the IBA, including legislative information and advocacy opportunities. Following the update, local legislators from the Indiana General Assembly will join bankers for lunch. The meeting will begin at 11:00 a.m. local time.
New Albany – October 17
The Exchange Pub
118 W Main Street
New Albany, IN 47150
FEDERAL GOVERNMENT RELATIONS
Trade Groups Urge Congress to Reject Credit Card Routing Amendments
A proposal to add new credit card routing mandates and a related study to a major defense spending bill has no place in the legislation and would harm military families, financial industry trade groups stated in a letter to congressional leaders Wednesday. Sens. Richard Durbin, D-Ill., and Roger Marshall, R-Kan., last week filed an amendment to add language from their Credit Card Competition Act to the National Defense Authorization Act, which Congress will take up this month. They also introduced a second amendment requiring the Defense Department and Treasury Department to coordinate creating a report of the top 10 debit and credit card issuing financial institutions whose cards are used at military concessions.
In their letter, the trade groups – which included those for military-serving banks and credit unions – said the two amendments "will rob military families of their credit card rewards, reduce the availability of safe credit and undermine the nation's data security." The amendments "have been filed with the goal of enriching the largest multinational retailers and obscure payments processors and have no business being added to annual legislation designed to bolster our national defense. After months spent failing to obtain more than a single co-sponsor for the CCCA, it does not belong in NDAA."
The groups said the study would be a waste of taxpayer dollars because it would duplicate already existing data and not research how rising retail prices affect military families. "It is cynical and disrespectful to those who served and sacrificed to invoke Purple Heart recipients, POW-MIA heroes and disabled American veterans in a desperate attempt to buoy the earnings of corporate retailers, yet the study amendment does so," they said.
As for the new routing mandates, the groups reiterated that the changes Durbin and Marshall are proposing would reduce the number of credit card issuers competing for consumers' business, limit popular credit card rewards programs and put the nation's private-sector payments system under the micromanagement of the Federal Reserve Board. "Congress should not double down on this failure in this year's NDAA, especially considering it is not germane to this bill," they said.
Bank Trade Groups Call Out Misleading Warren Report on Zelle Fraud
Financial trade associations are pushing back against a report issued by Sen. Elizabeth Warren, D-Mass., examining fraud related to instant payments sent via the Zelle network. The report criticized banks for their anti-fraud efforts, citing bank data. "Today's report from Sen. Warren fails to acknowledge that 99.9% of the five billion transactions processed on the Zelle network in the past five years were sent without any report of fraud or scams," the trade groups said. "Zelle has soared in popularity with bank customers because it's fast, free and easy to use. Customers also take comfort in knowing that Zelle transactions are provided by and through their trusted bank."
The groups also emphasized that banks "take steps to mitigate instances of fraud and criminal activity," and "contrary to Sen. Warren's report, banks are obligated under federal law to investigate every instance in which a customer disputes a transaction made via Zelle and provide reimbursement if the transaction was unauthorized, an obligation banks take seriously to ensure protection for their customers."
The Warren report also called for a change to Regulation E that would expand the current liability framework for banks, which the groups also vigorously opposed, warning that doing so "would force Zelle providers to either scale back Zelle's popular instant P2P services given the financial risk, possibly limit the instantaneous features or impose fees to recover their additional costs. Either way, consumers' access to these valued services would be limited, forcing them to meet their needs outside the well-regulated banking system."
Data previously released by the Bank Policy Institute confirms that Zelle remains the safest option for consumers seeking to move their money through peer-to-peer payment apps. Zelle had the lowest rate of disputed transactions when compared to Venmo, Paypal, and CashApp – in fact, the share of disputed transactions made using CashApp was six times higher than those on Zelle.
"The report issued today offers no constructive solutions to better prevent and crack down on fraud," the trade groups said. "We urge policymakers and law enforcement to join with the payments industry in focusing on steps to prevent bad actors from scamming customers out of their money and educating consumers on how to use these services safely.
FDIC's Gruenberg Addresses Evolving Climate Change Risk for Banks and Regulators
Banks have managed weather-related events and risks well, but things are changing, and regulators and banks, particularly small and midsize institutions, will need to adapt – that was the message Monday from Federal Deposit Insurance Corp. Acting Chairman Martin Gruenberg during the American Bankers Association’s Annual Convention in Austin, Texas.
"As an initial step, boards of directors and senior management may wish to seek a better understanding about how climate change and climate-related financial risk are impacting the institution's business, customers and communities, and how this risk may evolve over time," he said.
In particular, banks "may wish to consider developing appropriate sound governance frameworks and processes that have the capability for incorporating the assessment and management of climate-related financial risk as appropriate to their size, complexity and risk profile," Gruenberg said. "The FDIC views strong corporate governance as the foundation for safe-and-sound operations…Building this internal infrastructure and leveraging these processes early will assist institutions with prudently managing unforeseen climate-related shocks, as well as any potential gradual, cumulative impacts of climate-related financial risk.
Gruenberg emphasized that the FDIC is not responsible for climate policy and "will not be involved in determining which firms or sectors financial institutions should do business with. These types of credit allocation decisions are responsibilities of financial institutions." He noted that climate risk supervision is new territory for the FDIC, and that his agency would "continue to expand its efforts to address climate-related financial risks through a thoughtful and measured approach," and that the FDIC would "appropriately tailor any future supervisory expectations to reflect differences in financial institutions' circumstances, such as complexity of operations and business models."
Republican AGs Criticize Hiring of OCC Climate Risk Officer
In a joint letter last week, 17 Republican state attorneys general said they objected to the appointment of Yue Chen as the Office of the Comptroller of the Currency’s chief climate risk officer, calling the hiring an example of the Biden administration politicizing financial regulation by using financial agencies "to promote radical environmental policy." They also threatened to "investigate, litigate and work with our members of Congress" if banks in their states feel pressured to cut services to businesses because of the administration's environmental focus. Indiana Attorney General Todd Rokita is among those who signed the letter.
Chen was named chief climate risk officer in September and is the second person to hold the position in a non-acting capacity since its creation last year. The Republican AGs called her appointment the latest in a series of moves "that seek to turn the financial system, and federal financial regulators, into environmental regulators." They also said their offices "will not sit idly by if you choose to abuse your authority to harm our states and their citizens."
Republicans Lodge Legal Query on Fed's CBDC Development
Republican senators have asked U.S. Attorney General Merrick Garland to rule on whether the issuance of a central bank digital currency, which is currently in the initial stages of development by the Federal Reserve, would be acceptable without previous legislation by Congress. The lawmakers pointed out that Fed Chair Jerome Powell and Vice Chair Lael Brainard have previously stated that legislation would be necessary.