AFSPA's 'Consumer Financial Education Newsletter'

For Your Customers!

The DOJ-Visa Suit: Does it Mean the End of Free Checking?

The U.S. Department of Justice lawsuit against Visa could affect banking institutions’ fee income from interchange and the role they play in the payments systems. Here’s why DOJ filed suit, how it wants to change Visa’s role in the marketplace, and the strategic implications that should be on banking executives’ minds.

In early October, the U.S. Department of Justice (DOJ) filed an antitrust lawsuit against Visa, calling into question how it retained and gained debit card market share in the post-Durbin era. Visa, the DOJ alleges, has created a “web of unlawful anti-competitive agreements to penalize” financial institutions, merchants and processors for using competing payment networks.

Setting aside whether Visa in fact has monopolized debit payments, executive teams and boards must determine how the suit could affect interchange revenue, checking account monetization, and even opportunities for institutions to play a greater role in payments.

Read more at The Financial Brand

FTC Takes Action Against Online Cash Advance App Dave for Deceiving Consumers, Charging Undisclosed Fees: Federal Trade Commission

Federal court complaint charges that company rarely provides advertised advance amounts, charges ‘tip’ fee to consumers without their knowledge

The Federal Trade Commission is taking action against online cash advance app Dave for allegedly using misleading marketing to deceive consumers about the amount of its cash advances, charging consumers undisclosed fees, and charging so-called “tips” to consumers without their consent.

Dave describes the consumers it targets as being “financially vulnerable” or “financially coping,” including those whose spending exceeds their income, who have minimal savings, and who overdraft their bank accounts frequently.

Read more at The Federal Trade Commission

Have a tax law question?

Our #IRS Interactive Tax Assistant has answers.

Watch this short video to learn more:

https://youtu.be/y6HkaBkdKdU

• New parents? Certain tax credits can help your family’s finances grow stronger. See if you’re eligible to claim tax breaks that may lead to a lower tax bill and a higher refund for your growing family: www.irs.gov/parents

Jose L. Santiago

Public Affairs Specialist

Tax Outreach, Partnership and Education

Email: jose.l.santiago@irs.gov

How U.S. Instant Payments Can Catch Up to the Rest of the World

After a near-death experience in 2023, a shift in marketing has helped get the Real-Time Payment Network of The Clearing House back on a growth path. The launch of rival FedNow in 2023 also helped.

As David Watson, president and CEO of The Clearing House describes it, the early years of its Real-Time Payments Network passed in an atmosphere of “Kevin Costner, ‘If you build it, they will come. We’ll take any payment, every payment’.”

In Costner’s “Field of Dreams,” the ghosts of the Chicago White Sox, besmirched by the “Black Sox” gambling scandal, arrive after his character builds a baseball diamond in a cornfield. RTP, introduced in late 2017, the first new payments settlement system to come along in decades, didn’t prove so magnetic at first.

Watson joined The Clearing House — owned by 22 major U.S. banks — in early 2023. Soon after the future of RTP came before a concerned TCH board. The Federal Reserve was on the verge of introducing its own instant payments network, FedNow, and RTP’s usage was looking anemic compared to the significant role played by instant payments in other countries. With FedNow on the horizon, “a lot of people had sat back and waited,” said Watson. As a country, he said, the U.S. lost a few years of growth in instant payments.

Read more at The Financial Brand

Banking the Unbanked: JP MORGAN

Fintech innovations are driving financial inclusion

Some 1.4 billion people globally are currently unbanked.1 This has a serious impact on economic development: Without access to a bank account, individuals are prevented from being able to safely save money, earn interest, accept and send digital payments, and access credit. There are societal consequences, too. Unbanked people are vulnerable to exploitation, less likely to be homeowners, and experience low social mobility. 

Fixing the problem has become an urgent priority. The United Nations (UN) names financial inclusion as a key enabler for a many of its Sustainable Development Goals for 2030.2

Christine Tan, Head of Financial Institutions Group, APAC, J.P. Morgan Payments, is a leader on the bank’s financial inclusion work. Tan notes that key banking access pain points include “accessibility to banking infrastructure—both physical and digital; high costs and fees; financial literacy; and limited access to identification documents.” Many of these are long-term, systemic issues, and so “building trust and security in the formal banking systems both for individuals and wider communities who have previously been denied these services is crucial,” she says. 

Read more at JPMORGAN.COM

Fed aims to make instant payments the norm

“It’s going to be up to us to move instant payments from being novel to being normal,” the Federal Reserve’s chief payments executive, Mark Gould, told Money20/20 attendees.

The Federal Reserve aims to make its instant payments system FedNow an everyday utility in the U.S. financial services sphere, offered by every bank, Mark Gould, the central bank’s chief payments executive for financial services, told attendees at a major industry conference last week.

“It’s going to be up to us to move instant payments from being novel to being normal,” Gould said during a discussion on “the rise of instant payments” with Modern Treasury CEO Dimitri Dadiomov at the Money 20/20 conference on Oct. 27.

He likened the situation to telephone landlines being common 10 years ago, but noted how few people in the audience today probably have one at home. He said he didn’t know when real-time payments will be one of those types of commonplace services, but predicted they will be at some point.

Read more at BANKINGDIVE

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Changing Conditions May Drive More Community Bank Mergers in 2025

After a triple whammy of high rates, underwater portfolios, and an administration skeptical of mergers, community banks may see improved prospects for building scale through M&A next year. What could derail their chances? Three regulators and a Justice Department who have all decided to follow their own roadmaps.

Could community bank merger and acquisition activity accelerate in 2025 after a multi-year lull? A special report from Fitch Ratings says it’s quite possible, with the pace of that acceleration depending on how many factors that could favor M&A pan out.

On the eve of the presidential election, it would be tempting to put all the chips on the future of bank mergers on who wins the White House. And although that is a factor, it’s not that simple.

Broadly, the Federal Reserve’s plan to reduce interest rates, which began with a 50-basis point cut in September, has started a positive shift in the value of both banks’ investment portfolios and their loan holdings, according to Fitch.

Read more at The Financial Brand

CFPB and CMS Take Action to Stop Illegal Billing of Lowest-Income Medicare Recipients: Consumer Financial Protection Bureau (CFPB)

New statement warns healthcare providers, Medicare Advantage plans, and debt collectors about improper billing and collections

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) and the Centers for Medicare & Medicaid Services (CMS) issued a joint statement to protect millions of people with Medicare living at or below the poverty line from unlawful medical bills. These people in the Qualified Medicare Beneficiary group represent about one in eight Medicare recipients nationwide. Federal law generally prohibits healthcare providers who accept Medicare from billing these people – referred to as “QMBs” – for cost-sharing, such as co-pays or deductibles.

“Medical bills are a major contributor to bankruptcy and financial collapse for a family,” said CFPB Director Rohit Chopra. “The CFPB and CMS are working to ensure that Medicare beneficiaries are not subjected to illegal debt collection on improper medical bills.”

Read more at Consumer Financial Protection Bureau (CFPB)

More States Are Planning for the Coming Retirement Surge: PEW

Policymakers turn to auto-IRA programs to help their constituents—and budgets

A record number of Americans are reaching retirement age this year, marking the start of an unprecedented surge in Americans turning 65 that will last through roughly 2027, and bringing issues related to life after work to the forefront for individuals and policymakers. Financial security is of particular concern. Although the retirement savings gap—the difference between what workers have set aside for retirement and what they will need—has improved in recent years, studies have consistently found that most Baby Boomers haven’t saved enough and will probably have to rely primarily on Social Security and Medicare as they age.

The wave of people leaving the workforce also affects the public sector, with the associated fiscal and policy strains increasingly viewed as a present-day crisis. The Pew Charitable Trusts estimates that by the end of 2040, insufficient retirement savings will have cost states and the federal government a combined $1.3 trillion since 2021 in increased public assistance spending, administrative costs, and reduced tax revenue.

Read more at The Pew Charitable Trusts