ABA Statement on Federal Reserve’s Proposed Regulation II Changes

“We are deeply disappointed with the Federal Reserve’s proposed reduction in debit interchange fees, and strongly disagree with the flawed data and incomplete process that produced this result. As the Federal Reserve concedes, this proposal has the potential to make checking accounts, debit cards and a range of financial products more expensive for American consumers, while delivering an unprecedented gift to big-box retailers that have shown no inclination to pass any savings along to customers. Far from holding community banks harmless as the Fed claims, smaller institutions will be sharply impacted by this change, as revenue they use to pay for a range of financial products and services is reduced. Regulation II has also accelerated consolidation in the industry and more small banks are covered by these caps. If enacted, this government price cap would result in reduced fraud protection and reduced access to debit cards, which no one should want, including merchants. Even more troubling is the idea that the Fed wants to automate this misguided process and policy and repeat it every two years.

“The Federal Reserve claims to be a data-driven regulator, and as such, has the responsibility to ensure its data inputs actually tell the full story. With this proposal, the Federal Reserve is calling into question not just the end result, but the process itself, which has lacked transparency and public engagement. The Durbin Amendment has distorted the market to the detriment of small businesses, consumers and financial institutions of all sizes, and further expanding government price controls will only exacerbate those damaging consequences. 

“We will join with other stakeholders to firmly oppose this change.”