Nearly 80% of commenters — including academics, activists, banks and credit unions, consultants and financial technology firms, individuals, nonprofits, payment card networks, and trade associations — oppose the Federal Reserve’s proposed rule that would lower the cap on debit card interchange fees, according to a new analysis the American Bankers Association sent to the Fed today.
The Fed last year issued a notice of proposed rulemaking lowering the debit card interchange fee to a base component of 14.4 cents, an ad valorem component of four basis points multiplied by the value of the transaction and a fraud prevention adjustment of 1.3 cents. More than 300 individuals and organizations wrote letters to the Fed opposing the proposed rule during the public comment period.
“Enough Black Americans became at risk of becoming unbanked after the 2011 price cap,” wrote Perdue University Professor Ronald Stephens. “This problem will only increase in size and scope if the Fed makes the price cap more severe today.”
Another commenter was Kish Bank in Pennsylvania, which said that regulators need to recognize the effects of their decisions on community banks. “We do not have the capacity to offset this revenue source and the lower income communities which we serve will be unable to pay service charges on their current free checking accounts,” the bank wrote.
The broad swath of opposition to the Fed proposal reflects just how harmful this proposal will be, said Tom Rosenkoetter, SVP and executive director of ABA’s Card Policy Council.
“Commenters from a wide range of perspectives agree that community financial institutions, small businesses and consumers will bear the real cost,” Rosenkoetter said. “Many point out that additional government price controls on debit card interchange could threaten the availability of simple, low-cost Bank On-certifed accounts, which have helped reduce the number of unbanked in the country. By finalizing this rule, the Fed would be jeopardizing the important progress made to ensure all Americans can access affordable banking services.”
