The Federal Reserve Board’s (FRB) has proposed a rule to amend Regulation II, published in the Federal Register. This proposed rule would significantly lower the cap on debit interchange fees that covered issuers ($10 billion or more in consolidated assets) generally may receive for debit card transactions.
If finalized in its present form, the proposed rule would lower the cap on debit interchange fees from the sum of: 1) 21 cents, 2) five basis points multiplied by the value of the debit transaction, and 3) a 1-cent fraud prevention adjustment to a sum of a) 14.4 cents, b) four basis points multiplied by the value of the debit transaction, and c) a 1.3-cent fraud prevention adjustment.
Importantly, the proposed amendments would also establish a mechanism that would update the interchange fee cap based on the latest data received by the FRB in biennial surveys of covered issuers. If adopted, this formulaic approach would result in automatic revisions to the amount of the interchange fee cap every two years (starting in 2025) without any public comment.
When the FRB voted to approve the proposed amendments during its October 25 meeting, FRB Governor Michelle Bowman opposed the proposal and was the sole dissenter. She said: “While the proposal suggests that it could result in benefits to consumers, I am concerned that the costs for consumers — through the form of increased costs for banking products and services — will be real, while the benefits to consumers — such as lower prices at merchants — may not be realized.”
The California and Nevada Credit Union Leagues oppose legislative and regulatory changes to the existing interchange system. The Leagues will soon launch a Connect for the Cause campaign and urge credit unions to amplify the Leagues’ message by submitting comments via this platform. Stay tuned for more information coming your way soon!
The comment period for this proposed rule ends February 12, 2024.
To learn more about the proposed rule, you can read the Leagues’ detailed summary.
If you have any questions regarding the proposed rule, please email Lisa Quaranta, the Leagues’ vice president of regulatory advocacy.
