| July 20, 2010 |
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Congressional Calendar
| Tuesday, July 20, 2010
House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation Subcommittee Hearing:
Status of U.S.-flagged Vessels in U.S.-Foreign Trade.
2167 Rayburn House Office Building, 10:00am.
House Education and Labor Subcommittee on Health, Employment, Labor and Pensions Subcommittee Hearing:
Creating Greater Accounting Transparency for Pensioners.
2175 Rayburn House Office Building, 10:00am.
Wednesday, July 21, 2010
Senate Agriculture, Nutrition and Forestry Committee Hearing:
The status and future of the Farm Bill's energy and rural development programs.
328-A Russell Senate Office Building, 9:30am.
Senate Banking, Housing, and Urban Development Committee Hearing:
The Semiannual Monetary Policy Report to Congress.
G-50 Dirksen Senate Office Building, 10:00am.
Senate Commerce, Science and Transportation Committee Hearing:
Safe Port Act Reauthorization: Securing our Nation's Critical Infrastructure.
253 Russell Senate Office Building, 2:30pm.
House Education and Labor Committee Markup:
H.R.5663, the "Miner Safety and Health Act of 2010."
2175 Rayburn House Office Building, 10:00am.
Thursday, July 22, 2010
House Financial Services Committee Hearing:
The Semiannual Monetary Policy Report to Congress.
2168 Rayburn House Office Building, 9:30am.
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| Letter from Joe |
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Greetings,
This week's newsletter which details several issues we are currently working on, but most notable is the article regarding the passage of Interchange Reform!
As you know, we could not have done this without the help of your organizations in the states. Driving home this issue combined with transitioning from the consumer advocacy to the small business point of view along with a strategic shift from the House Judiciary committee to the Senate Finance Committee we were able to secure this huge victory for the industry. As our members told many of your colleagues who were in town with us last week, without the buy in and participation from the State Retail Associations there really is no way that this provision would have remained included in the final package.
Our membership knows the value that you all have brought to the table and we continue to trumpet your achievements. The retail industry needs to understand the value SRAs bring both on advocating for federal legislation and protecting retail interests at the state and local level and RILA will continue to advocate on your behalf to our entire membership.
Once again, thank you for all your assistance over the last year!
Please let me know if you have any questions and I look forward to seeing you in Denver for the CSRA Annual Meeting.
-Joe
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| Interchange Reform Clears Senate; President to Sign Into Law |
Last Thursday the Senate passed the conference report to the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) by a vote of 60 to 39, clearing the final hurdle to passage, with President Obama expected to sign the bill into law on Wednesday. The conference report passed with the support of Republican Senators Scott Brown (R-MA), Susan Collins (R-ME), Olympia Snowe (R-ME) and all Democratic Senators except for Senator Russ Feingold (D-WI), who said that the bill did not go far enough. The House of Representatives passed the conference report on June 30, 2010 by a vote of 237 to 192.
The bill includes provisions authored by Senate Majority Whip Richard Durbin (D-IL) relating to interchange "swipe" fees, which were added to the bill during Senate consideration of the bill that passed by a vote of 64 to 33. The so-called Durbin Amendment, which was modified by conferees and can be found in Section 1075 of the conference report, provides authority to the Federal Reserve Board to ensure that debit card interchange fees are "reasonable and proportional" to the actual cost of processing the transaction. Once the new law is enacted, businesses will have the ability to offer discounts for payments between transaction types (e.g., cash, check, debit) in order to steer customers towards less expensive forms of payment. In addition, businesses will be able to set minimum transaction amounts for credit cards up to $10, a feature currently prohibited by card networks. Provisions that can be expected to provide the greatest relief and certainty (e.g., reasonable and proportional interchange rates) require Federal Reserve rulemaking before they take effect, and RILA will continue to lead industry efforts throughout that process.
A short summary of the interchange provisions and rulemaking required can be found below, in addition to links to additional resources.
Durbin Amendment Summary
Federal Reserve Authority – The Federal Reserve is charged with issuing new regulations within nine months of enactment, and taking effect three months thereafter, on whether debit card interchange rates are "reasonable and proportional to the cost incurred by the issuer with respect to the transaction." As part of the rulemaking, the Federal Reserve is to consider the functional similarity between debit transactions and checks, which clear at par, and the incremental cost incurred by the issuer in the authorization, clearance or settlement of transactions.
Network Fees – Network fees charged by credit card companies to businesses are exempted from the Federal Reserve regulations. The Federal Reserve, however, is given authority to ensure that a network does not attempt to circumvent the intent of the new regulations by creating new fees to compensate issuers, directly or indirectly, for debit card transactions.
Fraud Adjustment – The Federal Reserve is given authority to adjust upward debit card interchange rates on a per issuer basis if the issuer takes steps to reduce fraud through a number of means, including implementation of cost-effective fraud prevention technology.
Exemption – Banks, credit unions and thrifts with assets of less than $10 billion (not adjusted for inflation) are exempted from the Federal Reserve regulations. Debit cards and general-use prepaid cards issued by federal, state, or local government-administered payment programs are exempted from the Federal Reserve regulations, as are all reloadable prepaid cards not tied to an individual's demand deposit account.
Exclusivity Arrangements – One year after enactment, the Federal Reserve is charged with prescribing rules to ensure that debit transactions are not restricted to a single payment card networks. The regulations are also required to prohibit networks from erecting routing restrictions. This so-called "multi-bug" provision was added to the bill through the agreement reached in conference.
Discounting – Credit card companies are prohibited from restricting the ability of businesses to offer discounts for payments made by cash, checks, debit cards or credit cards. However, discounts may not differentiate between card issuers or card networks.
Minimums – Businesses are permitted to set a minimum transaction amount of up to $10 for credit card transactions, with authority given to the Federal Reserve to increase this amount.
SNAP and Food Stamp Programs Unchanged – The provision clarifies that nothing in the language modifies existing food stamp programs, which are administered electronically but do not charge retailers an interchange fees.
To view additional information regarding the modified Durbin Amendment, including additional supporting documents, click on one of the links below:
Rulemakings Required by the Durbin Amendment
Reasonable and Proportional – Not later than 9 months after enactment, the Federal Reserve is required to issue final regulations to determine whether debit card interchange fees are "reasonable and proportional." Assuming a 30- to 60-day comment period, proposed regulations should come out no later than 7 to 8 months after enactment (i.e., February/March 2011).
Adjustments for Fraud – Not later than 9 months after enactment, the Federal Reserve will issue final regulations that will allow the Fed to make adjustments to the interchange rate if issuers of debit cards implement certain fraud prevention standards.
Network Fee Exclusion – Not later than 9 months after enactment, the Federal Reserve will issue final regulations to exempt network fees from Federal Reserve debit card interchange regulations, ensuring that network fees are not used to circumvent the intent of the law.
Multi-Bug Requirement – Not later than 12 months after enactment, the Federal Reserve will prescribe regulations preventing issuers from restricting the routing of debit card transactions to only one card network.
No Routing Restrictions - Not later than 12 months after enactment, the Federal Reserve will prescribe regulations ensuring that no restrictions are placed on a merchant's ability to route debit card transactions over a network accepting such transactions.
Minimum Purchase Amounts – The bill allows businesses to set a minimum transaction level of up to $10 for credit card payments. The Federal Reserve is given rulemaking authority to increase this dollar amount.
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| Treasury Department Proposes to Expand Bank Secrecy Act Requirements to Gift Cards |
On June 28, 2010, the Department of Treasury's Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking that would expand certain requirements under the Bank Secrecy Act to gift cards and prepaid access cards offered by many retailers. The proposed rule would require enhanced recordkeeping and reporting requirements, including Suspicious Activity Reports, by sellers of gift cards and prepaid access cards in order to assist law enforcement, which has reported an increased usage of such cards for money laundering and terrorist-financing activities. Without changes, these new requirements would impose substantial burdens and create costly barriers for retailers that offer gift cards and prepaid access cards.
Last week, FinCEN extended the comment period on the proposed rule to August 27, 2010. We are soliciting feedback from RILA members on the effects that the propose rules would have as well as alternatives to decrease compliance burdens and costs. While RILA intends to submit a comment letter reflecting member views, we encourage RILA members to consider submitting individual company comments as well, given the potential adverse affects that this proposed rule could have on the retail industry.
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| Congress Passes Transition Relief for Fed Gift Card Rules |
Last week, the Senate cleared legislation (H.R. 5502) to extend the effective date for certain disclosure requirement set out in the Federal Reserve's gift card regulations issued on March 23, 2010. In finalizing its rules, the Federal Reserve found little latitude for providing transition relief from the required August 22, 2010, effective date under the Credit Card Accountability and Disclosure Act of 2009 (Credit CARD Act). As a result, the final rule would have required millions of gift cards currently in the marketplace to be removed and destroyed in order to comply with the new rules.
Under the bill, which the House approved on June 14, 2010, gift cards produced prior to April 1, 2010, must still comply with the new requirements relating to limits on expiration dates as well as dormancy, inactivity or service fees. However, the disclosure requirements, which call for new consumer information to be printed on the card, are delayed until January 31, 2011. Card issuers, however, will have to notify consumers – through in-store signage, messages during customer-service calls, web sites, and general advertising – regarding the new limits on expiration dates and certain fees.
The bill, which is awaiting the President's signature, will provide critical relief for retailers making the transition to new gift cards and gift certificates that fully comply with the Credit CARD Act without having to incur the cost and security precautions to remove and destroy the existing inventory of such items. The transition relief also ensures that consumers of gift card and gift certificates will continue to have access to these important products without unnecessary disruption as retailers implement the new rules.
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Senate Expected to Take Another Run at Tax Extenders Bill
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After repeated attempts to arrive at a compromise on American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213) prior to the July 4th recess, the Senate is expected to consider the tax extenders package again this week, after moving the unemployment insurance extension separately. For businesses, the bill would extent a range of popular tax benefits, including the research and development credit, the 15-year recovery period for leasehold, restaurant, and retail improvements, the new markets tax credit, the active finance exception under Subpart F, and the controlled foreign corporation (CFC) look-through rules, through the end of 2010.
Previously, Congress removed the so-called "doc fix" from the bill, and with unemployment insurance on a separate track, the tax extenders package will stand largely on its own, albeit without two time-sensitive provisions to help drive congressional action. The revenue offsets to the bill continue to raise concerns among some Senators, since they would increase the tax on certain international transactions, carried interest, and certain S corporation distributions.
With the modifications to the tax extenders package, the House will have to reconsider the legislation assuming Senate action occurs prior to the House adjourning for the August recess at the end of this month. We will continue to monitor this legislation and keep you apprised of developments.
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| RILA Joins Letter Raising Issues on Lithium Battery Rulemaking |
The Department of Transportation (DOT) released a proposed rule earlier this year on lithium batteries, which proposes tougher standards for shipping the batteries on cargo flights. Recently, leadership from the House Transportation and Infrastructure Committee sent a letter to Tansportation Secretary LaHood supporting the Pipeline and Hazardous Materials Safety Administration's (PHMSA's) proposed rule as it currently stands. RILA joined efforts last week with the Rechargeable Battery Association (PRBA) and others, and sent a response letter to DOT expressing concerns with the proposed ruling.
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| Waxman Expected to Formally Introduce TSCA Reform Legislation this Week |
House Energy and Commerce Committee Chairman Henry Waxman (D-CA) is expected introduce formally a modified version of legislation to reform the Toxic Substances Control Act (TSCA) as early as tomorrow. Passed in 1976, TSCA gives the U.S. Environmental Protection Agency (EPA) the authority to regulate chemicals. Critics of TSCA say that the legislation is outdated and does not give the EPA sufficient power to regulate or ban potentially dangerous chemicals. Since TSCA was enacted, the EPA has been able to evaluate only 200 of the 80,000 estimated chemicals in commercial use and has banned just five.
In April, Chairman Waxman released a discussion draft of the legislation, "Toxic Chemicals Safety Act of 2010," and his staff has since held several stakeholder meetings to gain input from the business community, relevant government agencies, and non-governmental organizations. The discussion draft would, among other things, (1) expand and strengthen the EPA's powers under TSCA, (2) establish a new safety standard of "reasonable certainty of no harm, meaning that "aggregate and cumulative exposure of the general population or of any vulnerable population to the chemical substance or mixture presents a negligible risk of any adverse effect on the general population or a vulnerable population" and (3) require manufacturers to prove the chemicals they produce are safe before they are put on the market. Under the discussion draft, companies would have to provide a minimum data set to the EPA and then provide additional information upon request. This information would be used to create a public database maintained by the EPA with information on every industrial chemical. A short summary of the discussion draft can be viewed here.
It is not yet clear which, if any, provisions from the discussion draft will be modified in the legislation. Of particular concern to retailers is the expansion of the definition of "chemical substance" to include "articles" and "mixtures" that would include finished products. When retailers are the importer of record, they could be responsible for testing and reporting requirements of the chemical makeup of imported consumer products under this broad definition. Depending on the legislative calendar, it is expected that the Energy and Commerce Committee will hold a hearing on the introduced legislation in the near future.
Sen. Frank Lautenberg (D-NJ) has introduced similar TSCA reform legislation under the title "The Safe Chemicals Act of 2010." However, with the limited amount of time on the legislative calendar, it is not expected that the Senate will act on TSCA reform during this Congress.
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| Miscellaneous Tariff Bill Placed on Suspension Calendar |
On July 7, the House Ways and Means Committee posted a draft manager's amendment of the Miscellaneous Trade and Technical Corrections Bill of 2009 (HR 4380, MTB). The MTB provides temporary duty reductions or suspensions on hundreds of imported products. Congress failed to extend the expiring MTB before adjourning at the end of last year, and since then the Senate Finance Committee and House Ways and Means Committee have been working to develop a $300 million MTB. For a duty reduction or suspension to be included in the MTB, a member must introduce a stand-alone bill that is then vetted by the International Trade Commission (ITC), the Commerce Department, and the Office of Management and Budget (OMB). The cost must be less than $500,000 per year and must not face any serious domestic opposition. In addition, to be included in the current package of MTBs, the bills would have had to (1) have been introduced in the House (in the last Congress) or in the Senate (in 2009) if they extend a duty suspension that expired on 12/31/2009, OR (2) have been introduced in BOTH House AND Senate, and have been vetted by the Administration. After this first package of MTBs is enacted, Congress will consider a second package of MTBs that didn't make it into the first package.
The MTB process has been held up for a long time, with the latest hurdle coming in March, when House Republicans instituted a temporary ban of all earmarks, which is defined to include MTBs. Supporters of the MTB now hope to avoid a House Ways and Means Committee vote by moving the bill directly to the House floor and then have the Senate pass an identical bill by unanimous consent. Democrats have listed the MTB package (H.R. 4380, now named the U.S. Manufacturing Enhancement Act) on the Suspension Calendar (requires 2/3 vote for approval) to be considered by the House of Representatives tomorrow.
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