August 05, 2014
Dear Chairman Hensarling:
On behalf of more than two million Americans for Prosperity activists in all 50 states, I write to express our concerns regarding the Federal Reserve Bank potentially entering the electronic payment processing business. The thought of the Fed entering the credit and debit card business, which it regulates, is alarming and threatens the free market which fostered the innovative industry we have today. We urge you and your committee to fully investigate this situation.
As you may be aware, this past fall the Fed issued a public consultation paper on electronic payment processing that expressed concerns with the current market. More specifically, they suggested that the current market is failing due to electronic payments not being processed in real time. As a “solution” they suggest that the Fed should create a new system that would fill this void in the market.
The Fed’s suggestion that there is a market failure is simply not true. There hasn’t been a market demand for real time payment processing. Even so, the private sector has been able to provide real time processing solutions for those seeking them. The electronic payment industry has been responsive to market demand and has experienced wide-spread innovation.
It is very concerning that the Fed wants to create a whole new payment processing system that would directly compete with businesses in the market that it regulates. This puts the private sector at an inherent disadvantage. Moreover, the Fed’s current check system is not only the slowest in the country, but it also operates at a loss. Given the Fed’s track record, this would not benefit consumers or the market.
Americans for Prosperity urges you and your committee to exercise oversight in this matter. Given the Fed’s questionable reasoning and non-transparent nature it is imperative that your committee fully investigate this situation in order to prevent damage of the free market.
Director of Policy
Americans for Prosperity