“The proposed rule to implement the amendment, announced by the Federal Reserve in December, will cause severe harm to the entire banking industry and, in particular, to community-based banks and the communities they serve,” the letter stated.
Twelve cents per transaction is the maximum banks will collect from merchants under the rules set forward by the Federal Reserve Board. In the letter, American Bankers Association called the Fed’s proposed rule restrictive on account that it did not consider the costs to maintain payments and fraud prevention systems. The association claimed the proposal would lead to a 70-85 percent decline in revenue and $14 billion “that could otherwise be used to drive economic recovery.”
“If the Federal Reserve’s rule is not stopped, banks will have fewer resources available to make loans in their communities and will be faced with very difficult choices, including not issuing debit cards, raising other fees, eliminating staff, and limiting other services that customers have come to expect,” the association wrote in the letter.
The association believes both large and small financial institutions would be adversely impacted by the rule, especially community banks. The exemption for institutions below $10 billion would fail to help, the letter expressed.
“Marketplace pressures will force all banks to conform to the artificially lower government mandated interchange rate restrictions to which larger banks will be subject… In the end, all banks will suffer from the interchange rule,” the letter stated.
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Click here to read the full letter from the American Bankers Association to Congress.
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