The American Bankers Association and four banking and credit union associations today voiced their support for legislation that would pause a Federal Reserve proposal to lower the cap on debit card interchange fees. The Secure Payments Act, sponsored by Sen. Ted Budd (R-N.C.) and four other senators, would prevent the Fed from moving forward with the policy until it completes a full quantitative impact study of its effects on consumer costs and the wider economy. A House version of the bill was introduced by Rep. Blaine Luetkemeyer (R-Mo.).
The Fed last year proposed revising Regulation II to lower the cap from its current rate of 21 cents and .05% of the transaction, plus a one-cent fraud adjustment, to 14.4 cents and .04% per transaction and a 1.3 cents fraud-prevention adjustment, effective June 30, 2025. It also proposed to update the cap every other year going forward by linking it to data from the board’s biennial survey of large debit card issuers.
In a letter to Budd, ABA and the other associations called the Fed proposal misguided, noting that interchange fees fund the technology upgrades, fraud prevention tools and zero liability that retail customers expect. They also noted that fees help fund low-cost Bank On accounts, which have brought millions of Americans into the banking system. More than a dozen groups have written to the Fed to express concern that the proposal could harm Bank On offerings.
“Nothing compels the Fed to revisit the interchange cap, and Congress directed the Fed to consider the negative effects the proposal would have on financial institutions and their customers, particularly low-and-moderate income consumers,” the associations said. “The overwhelming opposition to the rule from small financial institutions, community groups, think tanks and academics focused on financial inclusion validates the directive from Congress and makes the need for further consideration clear.”
Nichols: Public response shows potential harm of Fed proposal
In a separate statement in support of the Secure Payments Act, ABA President and CEO Rob Nichols pointed to the wide range of opposition to the Fed proposal, particularly in relation to its potentially harmful effects on Bank On accounts.
“Overwhelmingly, members of the public—ranging from community banks and civil rights activists to economists and everyday Americans—have spoken out about the real harms the Fed’s proposal to drastically cut debit interchange fees would cause banks, their customers and communities, particularly underserved and lower-income Americans,” Nichols said. “The Fed’s Regulation II proposal would deal a significant blow to low-cost Bank On accounts and other successful financial inclusion efforts, and the Secure Payments Act would help prevent this harmful mistake. We appreciate Sen. Budd’s leadership on this important legislation to require the Fed to stop and fully examine the implications of this misguided rule.”
