The Federal Reserve should delay any proposals on debit card fees due to a lack of adequate data to support policymaking and the potential negative effects on bank and credit union customers with checking accounts, the chairmen of two House Financial Services subcommittees said today ahead of a Fed hearing on the proposal. In a letter, Reps. Blaine Luetkemeyer (R-Mo.) and Andy Barr (R-Ky.) urged the Fed to postpone the meeting on proposed revisions to Regulation II. The Fed did not share any details about the proposal until 20 minutes before the meeting.
The two lawmakers said that the Fed’s process raises significant governance issues, given the public was only allowed to see the proposal minutes before the board took a vote to issue it. They also said the Fed recently mandated additional debit card routing requirements whose effects on financial institutions and competition are only now emerging. “Some of these impacts relate to issuer fraud mitigation and cost, but these are not accurately measured by current data collections, severely distorting and degrading their usefulness,” they said. “The Federal Reserve should gather that cost data on dual routing to obtain an accurate representation of issuer costs before proposing any changes to Regulation II.”
They also noted that the Fed is currently a payments system operator while simultaneously regulating private sector payments offered by commercial banks, including pricing and routing for debit card processing, and the lawmakers stated that their letter intended to provide oversight about the possible interaction of these dual roles.
Finally, Luetkemeyer and Barr noted that litigation on debit card rules is currently before the U.S. Supreme Court. “The appearance of a defendant federal agency changing course to benefit plaintiffs while the government expends resources to defend its prior votes is one that requires explanation,” they said.