Every Major National Bank And Credit Union Trade Association Joins To Urge Fundamental Revision Of Federal Reserve's Debit Card Rule

WASHINGTON, Feb. 22, 2011 /PRNewswire/ -- An unprecedented coalition of every major U.S. bank and credit union trade association today strongly urged the Federal Reserve to fundamentally revise its proposed rule on debit card interchange fees. The associations joined together to submit a comprehensive comment letter to the Fed detailing serious flaws in the proposed rule, which is designed to implement the Interchange Amendment to the Dodd-Frank financial regulatory reform legislation. If adopted, the rule would impose government price controls on fees, reducing current market levels by up to 80 percent. While the proposed rule will benefit the nation's largest retailers with billions of dollars annually in windfall profits, these costs will come at tremendous expense to consumers, community banks and credit unions.

The Federal Reserve's proposed rule imposes a fixed cap on interchange fees that it admits will prevent banks and credit unions from recovering even the basic costs of providing debit card services. In their letter, the trade associations urge the Federal Reserve to revise its rules and allow issuers to receive fees that, as specified by the Interchange Amendment, are reasonable and proportional to the issuers' actual costs with respect to debit card transactions. The trade associations have asked the Federal Reserve to follow its mandate from Congress to carefully consider the impact of any price regulation on consumers, financial institutions and the U.S. payments system as a whole.

At a hearing held by the Senate Banking Committee last Thursday, both Sheila Bair, Chairman of the Federal Deposit Insurance Corporation (FDIC), and Ben Bernanke, Chairman of the Federal Reserve Board, expressed serious reservations about the rule.

"The full policy ramifications – who's paying for what, who's going to pay more and who's going to pay less under this – is something that maybe wasn't dealt with as thoroughly as it might have been," said Bair.