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Washington, D.C. — America’s banks and credit unions urged the Federal Reserve to rescind its proposal to update Regulation II (Reg II) in a comment letter submitted today. The joint letter was submitted by the Bank Policy Institute, American Bankers Association, America’s Credit Unions, Consumer Bankers Association, Independent Community Bankers of America, Electronic Payments Coalition, Mid-Size Bank Coalition of America, National Bankers Association and The Clearing House Association.
The associations argue the proposal would harm consumers, banks and credit unions and would violate the law by prohibiting banks from recovering the costs they incur in providing affordable, safe debit card programs and a reasonable return on that business. The proposal would benefit large retailers like Walmart and Amazon at the expense of consumers and financial institutions of all sizes.
“[T]he Associations urge the Board to withdraw its proposed rule. The proposed rule would further lower the existing deficient price cap on debit card interchange fees and thereby amplify the damage already done by Regulation II as promulgated in 2011, including by driving up costs to consumers for basic deposit accounts disproportionately harming low-income and underserved consumers) and degrading the ability of banks and credit unions (including smaller, exempt issuers) to serve their communities and to invest in payment system innovation.”
Retailers pay a small transaction cost, known as an interchange fee, to the card issuer (i.e., the buyer’s bank) and the acquirer (i.e., the seller’s bank) when a consumer uses their debit card to make a purchase. The Federal Reserve’s proposal would further reduce the legal limit on the interchange fee already in place under Regulation II, thus restricting the resources available to banks to cover the costs of facilitating debit card transactions, cover fraud losses and fund innovation in the payments system, including ways to reduce costs that support all consumers, such as free checking accounts.
Major problems with the proposal:
To access a copy of the letter, please click here.
Additional Resources:
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About the American Bankers Association
The American Bankers Association is the voice of the nation’s $23.7 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard nearly $18.8 trillion in deposits and extend $12.5 trillion in loans.
About America’s Credit Unions
America’s Credit Unions is the unified voice for not-for-profit credit unions and their more than 140 million members nationwide. America’s Credit Unions provides strong advocacy, resources and services to protect, empower and advance credit unions and the people and communities they serve. For more information about America’s Credit Unions, visit AmericasCreditUnions.org.
About Bank Policy Institute
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.
About the Consumer Bankers Association
The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on X @consumerbankers.
About the Electronic Payments Coalition
We are the credit unions, community banks, payment card networks, and institutions that support the backbone of our economic system: electronic payments.
About ICBA
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.
As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.
About the Mid-Size Bank Coalition of America
Across the country mid-size banks are providing financial solutions to entrepreneurs, professionals, their businesses and their families. Mid-size banks fuel their growth and build stronger connections to the communities in which they operate. The MBCA is proud to be their voice and their self-help network.”
About the National Bankers Association
Founded in 1927, the National Bankers Association is the voice for the nation's Minority Depository Institutions (MDIs). No other trade association focuses solely on the priorities, federal advocacy, and representation of minority-owned and -operated banks. Members include Black, Hispanic, Asian, Pacific Islander, Native American, and women-owned and -operated banks. MDIs are located across 32 states and territories. For more information, visit nationalbankers.org.
About The Clearing House Association
The Clearing House Association, L.L.C., the country’s oldest banking trade association, is a nonpartisan organization that provides informed advocacy and thought leadership on critical payments-related
issues. Its sister company, The Clearing House Payments Company L.L.C. owns and operates core payments system infrastructure in the United States, clearing and settling more than $2 trillion each day. See The Clearing House’s website at www.theclearinghouse.org.