The Federal Reserve proposal to further lower the cap on debit card interchange fees under Regulation II will affect banks of all sizes, American Bankers Association President and CEO Rob Nichols said. Nichols today joined leaders from the Bank Policy Institute and other banking associations in a news conference to discuss the ramifications of the proposal. Among other things, Nichols used the opportunity to dispel what he said was the myth that the rule wouldn’t affect community banks.
Nichols pointed to a recent survey of bank executives from IntraFi that found 30% of respondents expect to make changes related to the cap despite the regulation’s $10 billion exemption threshold. He also noted banks’ experience following the passage Durbin Amendment in 2010, which created the cap. “Debit interchange fell for so-called ‘exempt’ financial institutions by as much as 35%,” he said.
Nichols and others at the press conference also warned that the rule would harm financial inclusion efforts by slashing funding banks use to offer Bank On accounts to the unbanked and underbanked. He noted that the CFE Fund—which oversees the Bank On program—said that the program was designed to be economically sustainable for banks, based in part on the current interchange rate. Slashing the cap would force banks to curtail their offerings, which could potentially include Bank On accounts, he said.
