Nichols: Proposed cut to debit card fees will hinder financial inclusion efforts

A proposal to significantly lower the cap on debit card interchange fees threatens to undo the considerable progress banks have made toward offering affordable deposit account products and reducing the number of unbanked, American Bankers Association President and CEO Rob Nichols said today in a letter to Bank On-certified banks.

In 2021, the unbanked rate fell to 4.5%—a record low—and five million unbanked households were newly banked, “a testament to banks and credit unions offering Bank On-certified accounts,” Nichols said. However, because Bank On accounts have very low monthly and almost no ancillary fees, they are largely supported through debit card activity. The Federal Reserve has proposed revising Regulation II to lower debit interchange fees by almost 30% and institute a biennial review of the cap without accompanying public comment each time.

“Ultimately, this sustained agenda to weaken the economic viability of debit card products jeopardizes consumers’ ability to access safe and affordable banking products,” Nichols said. He urged banks to contact the Fed before the Feb. 12 deadline for public comment to share their concerns about how the proposal will affect the economics of their Bank On-certified accounts.

“Unless we take action to ensure that the Federal Reserve understands that consumers are stakeholders worthy of consideration, this rulemaking will further imperil the economics that enable financial institutions of all sizes to offer Bank On-certified accounts,” Nichols said. “We are concerned that this regulatory overreach will jeopardize the economic sustainability of Bank On accounts just as we are reaching nationwide availability.”