Washington, D.C. (Oct. 25, 2023)—Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued the following statement on today’s Federal Reserve Board proposal to update Regulation II rules on debit card interchange fees and routing.
“ICBA has deep concerns about the impact of today’s Federal Reserve proposed rule to reduce interchange rates at banks with at least $10 billion in assets, which would harm all community banks and the customers and communities they serve.
“As Fed Governor Michelle Bowman said today in voting against the proposal, the agency’s cap on debit card interchange puts smaller card issuers at a disadvantage due to their smaller transaction volumes and lower negotiating power relative to larger issuers, which could cut off access to low-cost and no-cost banking services in local communities — even those served by the community banks that are intended to be exempt from the proposal. The Fed’s 2021 study bears out those concerns, showing that low-volume issuers operate their debit card programs at a loss due to their disproportionately high authorization, clearing, and settlement costs, demonstrating that the Fed’s debit interchange caps are not “reasonable and proportional” as required by the Dodd-Frank Act.
“Durbin Amendment price controls on debit card interchange have distorted the debit card and consumer checking markets solely to the benefit of big-box retailers, such as Walmart, Target, and Amazon. While the Durbin Amendment has severely diminished consumer access to debit rewards and free checking, Federal Reserve Bank of Richmond data shows merchants have pocketed $12 billion per year in interchange fees without passing the savings along to customers.
“Government price controls on debit card interchange have caused significant economic harm to community banks and the communities they serve, and further expanding these policies would only compound that harm. ICBA looks forward to reviewing today’s proposal and urges the Fed to mitigate its negative impact on community banks and local communities.”
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding nearly $5.9 trillion in assets, over $4.9 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.