BPI and Joint Trades Comment on Federal Reserve’s Debit Card Proposal

Dear Ms. Misback,

The Clearing House Association L.L.C.,^[1] the Bank Policy Institute, the American Bankers Association, the Independent Community Bankers of America, America's Credit Unions, the Electronic Payments Coalition, the Mid-Size Bank Coalition of America, the National Bankers Association, and the Consumer Bankers Association respectfully submit this comment letter to the Board of Governors of the Federal Reserve System in response to the notice of proposed rulemaking regarding modifications to Regulation II and the Official Board Commentary on Regulation II related to debit card interchange fees.^[2]

Representing the majority of debit card issuers, the 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.

We are concerned that the proposal is legally defective, is unauthorized by the Durbin Amendment, creates serious constitutional issues, and is unsupported by reasoned decision making. It is not designed to ensure issuers receive a rate of return, would deny an even greater percentage of issuers the ability to recover their costs than the current rule's flawed cap, and arbitrarily omits many readily-quantifiable and statutorily-permissible issuer costs the Board should consider in calculating its cost-based price cap.

Thus, for both legal and policy reasons, as described in greater detail herein, the Board should withdraw the proposal.

To read the full comment letter, please click here, or click on the download button below.

[1] A description of each Association is provided in Appendix 1 of this letter.

[2] Debit Card Interchange Fees and Routing, 88 Fed. Reg. 78100 (Nov. 14, 2023).