From the Federal Reserve Board:
“The Board is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer’s costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a stand-alone cap (initially set at 12 cents per transaction)… The Board also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.”
Below are excerpts of some of the comments that have been submitted thus far. (Related Article: The PYMNTS.com Community Comments on the Fed’s Debit Plan)
“Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Federal Reserve to issue regulations limiting interchange fees banks charge merchants and imposing requirements on the routing of debit transactions. I am concerned that the implementing regulations for this section, if not properly crafted, may have unintended consequences for consumer choice, the protection of consumer information, and Congress’ intent to reduce burdens on community banks, credit unions, and government benefit programs.” – Rep. Barney Frank (D-Mass.)
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“Like several of my colleagues, I have concerns about these instructions, and I voted against the amendment which added Section 1075 to the Dodd-Frank Act. I am also worried that the language in the Dodd-Frank Act is too narrow and that rules based on those instructions will not allow debit card issuers to recoup the full costs of offering cards to consumers. issuers incur expenses for staff and facilities to handle customer service and dispute management, for processing equipment, for the manufacture of cards, and for other expenses which Section 1075 explicitly excludes from consideration in the cost of a transaction. Card holders value the convenience and security of debit cards, but issuers may cease to offer debit cards if regulations require them to operate card programs at a loss. At the same time, there is no guarantee that retailers will pass savings from lower interchange fees on to the consumer.” – Claire McCaskill (D-MO)
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“Credit unions do not want to charge their members more fees. However, the result of the loss of interchange fee income for small issuers and the costs of having to belong to more payment networks will have a horrendous impact on credit unions that offer debit cards and their ability to build net worth. Because of statutory requirements, credit unions can only build net worth (capital) from retained earnings. Any significant reduction in interchange income will require higher fees paid by consumers. Thus, consumers will be left paying for the bonanza to merchants – which is not what Congress intended.” – Bill Cheney, President & CEO of the Credit Union National Association
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“If the proposal reduces the income source to 12 cents per transaction, FLNB will not make sufficient income to support the program. I estimate our loss would be S314,000 or $5.11 per account. Since our customers want the cards, we will not get out of the program. We will seek to charge our customers for the service.” – Paul Henry, First Liberty National Bank
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“I am the President of a small ISO… I am extremely concerned with the potential harmful effects this regulation has on my company, our employees, and their families. One of the primary arguments for regulation was that it would decrease costs for the consumer. Yet, no provisions have been added to ensure this happens? Essentially, merchants are being asked ‘do you want to save money with no consequences’? Who wouldn’t?” – Jay Holsomback, President of Secure Payment Solutions, Inc.
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“I represent a very small business in Fort Lauderdale, Florida… We have really felt the squeeze from the banking industry and feel that the debit card charges are excessive compared to the fair cost of processing debit cards. Please uphold your proposed limit on Debit Card Interchange Fees to $0.12 per transaction or less if it meets but does not exceed the cost of processing the transaction. Please also uphold your proposal to stop the restriction of routing. We trust that you will follow the intent of the Dodd-Frank Act.” – Alan Cords, Gentle Care Animal Hospital
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“I am shocked and dismayed at the Federal Reserve Board’s decision yesterday to approve a plan that places an arbitrary and hard cap on debit interchange fees. The Board’s proposal falls substantially short of capturing the costs associated with providing the debit service and, although the statute is very limiting, it by no means reflects the discretion accorded to the Board in establishing the proposed guidelines. Left unaltered, these proposed rules will drastically change the way consumers are accustomed to paying for goods and services and potentially damage our economic recovery.” – Steve Bartlett, President & CEO of The Financial Services Roundtable
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“As the trade association representing the approximately 200 credit unions serving communities throughout the Northwest, we have grave concerns about the impact of the proposed cap on interchange income being issued under the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. While the proposal is aimed at institutions over $10 billion in assets, the application of the action is likely to apply to all financial services providers, regardless of size. Furthermore, this implementation of the Durbin Amendment in the Dodd-Frank Act appears to constitute a redistribution of business earnings, by stealing money
from the banks and credit unions-that issue the cards, intermediate the transactions, carry the fraud risks, and float the consumer purchases-to retailers who have already profited on the sale of goods and services. The financial impact may be destabilizing.” – John Annaloro, CEO of Northwest Credit Union Association
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“As a small business owner, I am very supportive of your proposed effort to limit the usury swipe fees that credit card processors extract from businesses. Over the years these fees have skyrocketed, and are a substantial cost that is passed on to the consumer. Since the recent implementation of some controls of certain credit card processor practices, I see new fees added MONTHLY to my merchant statements… A reasonable cap, as is being proposed, would be a great help to the merchant. I can not speak for other merchants, but I would certainly pass those savings on to the consumer in the form of lower retail prices.” – Bill Hardee, VP – GM of The Warehouse Saloon & Billiards
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“I am the President and CEO of a realtively small credit union, Mid American (MACU). We have approximately 22,000 members most of whom are blue collar workers here in the heart land of America. MACU is very concerned with the Federal Reserve Board’s (FRB) recently proposed regulation for regulating debit card interchange fees and routing. The legislative exemption for smaller issuers to seems to contemplate exempting our members and others similarly situation from unreasonably low interchange fees. The proposal as written does not include provisions to ensure the small issuer exemption. Please use your authority to ensure that there is some way of enforcing what Congress intended.” – James D. Holt, President and CEO of MACU
Analysis of the Fed’s Draft Debit Card Regulations: PYMNTS.com Webinar
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Visa Inc. Statement Regarding the Federal Reserve’s Recommendations on the Dodd-Frank Act
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Federal Reserve Regulations Would Harm Consumers, Provide Windfall to Large Merchants
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