Senate Looks at Regulatory Gaps in Mobile Payments
Wack, Kevin, American Banker
Byline: Kevin Wack
WASHINGTON a The nation's capital is starting to pay attention to mobile payments. Whether that sharpening focus will help or hurt the industry's growth, however, remains an open question.
The Senate Banking Committee held its first hearing Thursday on the issue, focusing on the ways that mobile payment systems are upending existing regulatory schemes. It followed the first-ever congressional hearing on the issue last week in the House.
"If the payment is made through a bank, then the existing set of banking and consumer protection laws apply," Banking Committee Chairman Tim Johnson said. "However, payments made through a text message via a mobile network provider don't fall under banking laws."
A similar point was made by Kenneth Montgomery, chief operating officer of the Federal Reserve Bank of Boston, which has been convening an industry working group on mobile payments for more than two years.
He said that industry participants would like various regulators a from the Consumer Financial Protection Bureau to the Federal Trade Commission to the Federal Communications Commission a to work collaboratively to define the regulatory environment for mobile payments.
"Clarity of regulatory responsibilities among bank and non-bank regulators needs to be established early on, with input from the mobile stakeholders," Montgomery said in written testimony. "While current regulations and rules may cover underlying payment methods, there is confusion because multiple regulatory agencies have responsibility for different aspects of payments and wireless transactions."
During the hearing, Montgomery said that there are well-defined regulations for mobile payments when they are backed by credit cards and debit cards. But other forms of mobile payments a including those backed by prepaid cards, or linked to the customer's wireless phone bill a fall into a murkier realm.
"They're the areas where we need some further collaboration between the regulators," he said.
No one from the FCC, FTC or CFPB testified at Thursday's hearing. And while there was broad agreement that Washington needs to be watching the mobile payments market closely, there were few concrete ideas about what specific actions the regulators should be taking.
One exception was in the area of data privacy, where Montgomery testified that consumers should be allowed to instruct firms not to share their customer information.
"Consumers need to have the option to opt out from information that is being collected about them," he said. …