ETA works with Congressional offices and committees to represent our members' interests and to make sure that those interests receive a full and fair consideration in the development of legislation that affects the payments industry. We also engage, through outreach and education, the executive branch agencies and policymakers whose decisions often affect our members and the way they do business.
ETA Joins More Than 30 Organizations to Oppose Current CFPA Bill
The Electronic Transactions Association has joined with more than 30 other industry groups to oppose the current version of consumer financial protection legislation now before Congress. In a joint letter to Sen. Chris Dodd (D-CT) who chairs the Senate Banking Committee, and Sen. Richard Shelby (R-AL), the ranking minority member, the industry groups said they "agree reform is necessary and firmly support enhanced consumer protection [in financial Services]." However, the letter warned that the current Senate bill "is not the correct approach because it will have severe unintended consequences for consumers, small businesses, and the economy. As such, simple structural modifications to the CFPA that do not address the following concerns will not mitigate these unintended consequences."
Representatives of ETA and several member companies participated in a 90-minute conference call on August 13 to explain the components and operation of the interchange system to representatives of the U.S. Government Accountability Office.
GAO is conducting research for two reports on the interchange system, one requested by the Senate Small Business and Entrepreneurship Committee, the other required by the CARD Act, signed into law in May, 2009.
During the call, ETA members explained the different layers of the electronic payments system and defined the types of third-party businesses engaged in processing electronic payments. They also drew distinctions between the interchange rate and the discount rate, emphasizing that interchange is but one component of what merchants pay for electronic payments services. ETA detailed the high level of competition in the discount market and that, in fact, a small retailer has a greater ability to negotiate a favorable price for transaction processing than for any other utility required to run a business.
ETA directed GAO to data on the numbers, types, and value of transactions processed in a year, as well as to information showing the essential role of merchant acquirers and independent sales organizations (ISOs) in the electronic payments system.
ETA representatives will continue to work with various government agencies to provide assistance and information about the businesses they represent. ETA will also continue to engage legislators and regulators to ensure that they receive a balanced and complete picture of the electronic payments system.
ETA Releases Policy Position on Data Security, Breach Notification
ETA has released a policy position on data security and breach notification, in which the association srongly supports industry self-regulatory efforts for the protection of cardholder data, foremost of which is the Payment Card Industry Data Security Standards (PCIDSS). In the area of government regulation, ETA believes that a uniform national standard for data security and breach notification with respect to Personal Financial Information would best balance the rights of consumers to be notified of a breach when the security of their Personal Financial Information is truly at risk, while minimizing the compliance and legal risk to businesses.
State lawmakers around the country are continuing to target data security practices and breach notification issues as annual legislative sessions unfold. The predominant focus for 2009 seems to be on protecting data and preventing misuse of data, but breach notification rules and liability for breaches remain on the agenda in a few states.
Lawmakers in New York are poised to consider bills in their 2009 session that would impose significant new information use restrictions and data security obligations on banks and other financial institutions. Meanwhile, the Washington Legislature is moving on new companion bills to make retailers that breach credit and debit card information liable to banks for certain costs associated with such breaches.
In addition, New Jersey bills seeking to restrict the use of customer data by banks and to create expansive breach liability have been carried over to the Legislature's 2009 session.
What You Need to Know About IRS Merchant Reporting
On July 30, 2008, the Housing and Economic Recovery Act of 2008 was signed into law and a new reporting requirement was created for members of the electronic payments industry. Federal regulations implementing this law are not yet complete and specific requirements regarding responsible parties and mandated actions are still unknown. However, as preparation for compliance, you should become familiar with the Internal Revenue Service’s (IRS) Taxpayer Identification Number (TIN) matching program before any new reporting requirement associated with TIN matching and withholding goes into effect on December 31, 2010.
The new requirement will likely require payments-related businesses to keep track of the number and dollar amount of merchant transactions by each merchant’s Taxpayer Identification Number, or TIN. In certain cases, tax withholding may also be a part of this activity. This data would then be reported to the IRS on an annual basis.
Currently, federal regulations addressing this requirement are in the beginning stages of development at the IRS. The IRS’s goal is to have a Notice of Proposed Rulemaking (NPRM) issued before June 30, 2009. This will be the first version of the proposed regulations and will be open to public comment. ETA will coordinate an effort to provide input on behalf of its constituents to this process.
In the meantime, the IRS is encouraging payments professionals to familiarize themselves with the TIN matching program. Payments-related businesses can begin now to register, receive approval, and learn the TIN matching system before any reporting is required by law. Three IRS publications explain the TIN matching program and are available to you on the ETA website:
1. IRS Revenue Procedure 2003-9 T.D. 9041; Dept. of the Treasury Internal Revenue Service 26 CFR Part 31: “Taxpayer Identification Number (TIN) Matching Program.” This explains the TIN matching program on pages 510-522.
2. IRS Publication 2108A: “On-Line Taxpayer Identification Number (TIN) Matching Program.” This explains the online TIN matching program and how it might apply to merchant acquiring banks.
3.IRS Publication 1281: “Backup Withholding for Missing and Incorrect Name/TIN(s).” This discusses obligations and penalties regarding backup withholding for missing name/TIN information.
On a related note, on February 6, 2009, the IRS issued Announcement 2009-6 addressing the requirements of new tax code Section 6050W, which covers the newly legislated information returns reporting the number and value of certain merchant sales. The IRS states in the Announcement that any person required to complete information returns under tax code Section 6050W may use the taxpayer identification number matching procedures described in Revenue Procedure 2003-9 to verify payee TINs before making information returns.
The Announcement is scheduled to be published in Internal Revenue Bulletin 2009-9, dated March 2.
ETA will continue to monitor developments at the IRS regarding this program. Please contact Mary Weaver Bennett at ETA (202-828-2635 or ) if you have questions regarding this alert.
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