In response to a Trump administration effort to ease regulation, the American Bankers Association is urging officials to rescind the regulation implementing the Dodd-Frank Act’s restrictions on debit card interchange fees. Short of that, ABA suggested that the Federal Reserve withdraw a 2023 proposed rule regarding interchange fee caps and rescind a 2022 final rule regarding routing and exclusivity restrictions.
President Trump has directed the Department of Justice’s Antitrust Division to identify federal laws and regulations that undermine free-market competition and harm consumers and businesses, with the goal of possibly eliminating those regulations. Regulation II implements the Dodd-Frank Act’s Durbin Amendment through “unnecessary barriers to competition by imposing price caps that are not required by statute, forces card issuers to enter into business relationships that they otherwise would not and exceeds the board’s authority with respect to net compensation, in a manner that undermines free market competition,” ABA said in a letter to the DOJ.
The 2023 proposed rule establishes a price cap that would allow only 66% of covered issuers to recover just a subset of the costs they incur by providing debit card payment services, ABA said. The ABA also notes that “courts have repeatedly held that price-control regulations that fail to allow a reasonable rate of return are unconstitutional”. The 2022 rule imposed new mandates that require issuers to undertake expensive and time-consuming efforts to change their core network infrastructure, the association added. Both represent “unjust interference in the market and are not required under statute.”
Meanwhile, consumers were left worse off as “Regulation II led to a significant reduction in the availability of no-fee checking accounts and debit reward products. The Durbin Amendment neither requires nor supports this anticompetitive result.” Fed research indicates that merchants failed to pass the savings along to consumers as a result of the Reg II rule.
