ICBA expressed vehement opposition to a Federal Reserve Board proposal to impose a nearly 30% cut to debit interchange that would leave nearly one-third of covered issuers below cost recovery.

ICBA Comments: In its comment letter, ICBA said:

  • The proposal presents a one-size-fits-all solution crafted from incomplete community bank data that misrepresents the impact on both covered and exempt community banks.

  • The inability to cover costs will diminish investment in debit infrastructure and hinder innovation.

  • The Fed should withdraw the current proposal and proceed with a new rulemaking based on refined data collection methods for covered banks, community issuers, and new developments in the market, such as the increasing role of payment facilitators like Square and PayPal that charge flat pricing.

Joint Letter: ICBA and other financial services trade groups separately issued a joint letter urging the Fed to rescind its proposal. In their joint comment letter, the groups said the proposal would harm consumers, restrict resources used to mitigate fraud, disproportionately affect smaller issuers, and violate the law by prohibiting banks from recovering the costs they incur in providing debit card programs and a reasonable return on that business.

Fed Proposal: The Fed proposal would lower the maximum interchange fee that covered debit card issuers may receive for debit card transactions under Reg II. It would adjust the interchange fee cap for debit card issuers with at least $10 billion in assets and establish a regular process for updating the maximum amount every other year based on issuer cost data.

Previous ICBA Advocacy: ICBA has expressed deep concerns about the impact of the proposal on community banks and previously urged the Fed to reject merchant requests for further changes to Reg II. It supports legislation introduced by Rep. Blaine Luetkemeyer (R-Mo.) directing the Fed to stop and study its proposed changes before finalizing the rule.

Myth vs. Fact: ICBA and other groups previously released a document correcting myths surrounding the proposed changes and spotlighting the harmful impact of interchange regulations.