January 26, 2024

Fed Extends Comment Period on Debit Card Interchange Fee Proposal

The Federal Reserve is extending the public comment deadline to May 12 for its proposal to lower the cap on debit card interchange fees. The Fed also published additional data related to the fee cap to give the public more information to consider when filing comments.

The Fed is proposing to revise Regulation II to lower the cap from its current rate of 21 cents and .05% of the transaction, plus a 1-cent fraud prevention adjustment, to 14.4 cents and .04% per transaction and a 1.3 cents fraud prevention adjustment, effective June 30, 2025. It also would institute a new process in which the cap is revised every two years.

This extension comes after a recent meeting of the Fed’s Community Depository Institutions Advisory Council. As previously shared by MBA, the council said the proposal has introduced sustainability concerns for smaller and medium-sized financial institutions that are trying to stay independent rather than merging. The council suggested that the Fed withdraw the proposal and reintroduce it once an appropriate cost-benefit analysis has been conducted.

MBA President and CEO Jackson Hataway has said the proposal is “shortsighted, flawed and dangerous for consumers.” In a recent issue of The Missouri Banker, he discussed the Fed’s proposal, noting that the board has “lost sight of its mission, values and responsibilities.”

“Instead of attempting to preserve the vitality and diversity of the U.S. banking system, the Federal Reserve is placing more pressure on community banks to consolidate as operational costs increase while revenues are artificially and arbitrarily limited,” Hataway wrote.

MBA urges bankers to contact the Federal Reserve with this form or to prepare their own comment letter responding to the proposal before the May 12 deadline.

“Our collective voice is critical in preventing a massive misstep by the Federal Reserve board,” Hataway said.

CFPB Releases Proposed Rule on Overdraft Fees

Last week, the Consumer Financial Protection Bureau released a proposed rule that would amend Regulations E and Z to update regulatory exceptions for overdraft fees. The rule would force banks with more than $10 billion in assets to set overdraft fees in alignment with direct cost or an arbitrary benchmark set by CFPB (proposed in the rule as $3, $6, $7 or $14). MBA adamantly opposes this rule.

“The CFPB’s continued assault on overdraft protection will ultimately wreak havoc on the very consumers they claim to be protecting,” said MBA President and CEO Jackson Hataway. “This rule would inevitably impact all banks as they are forced to adapt to what is, in essence, an arbitrarily imposed market standard. We will continue to oppose this rule and the inflammatory and inappropriate rhetoric used by Director Chopra to support it.”

Hataway said the consequences of the proposed rule would be disastrous for banks of all sizes in Missouri.

“The CFPB’s claimsthat this is a targeted rulemaking approach flies in the face of what history has demonstrated time and time again: asset thresholds fail to prevent regulatory trickle down,” Hataway said. “In this case, we only need to look back to the lessons of Dodd-Frank to see how easily and quickly asset thresholds fail to protect banks from regulatory burden intended for ‘only the largest banks.’”

Hataway added it’s imperative that the banking industry unifies to combat this proposed rule. MBA is submitting a comment letter on the proposed rule and highly encourages bankers to do the same before the April 1 deadline.

Questions about the proposed rule can be directed to MBA Senior Vice President Carol Barnett.

CFPB Proposes Banning NSF Fees for Instantaneous Transactions

A proposed rule from the Consumer Financial Protection Bureau is intended to prevent banks and financial institutions from charging fees for transactions that are instantaneously declined. The proposed rule would prevent financial institutions from charging nonsufficient funds fees or other fees for ATM withdrawals, debit card purchases, peer-to-peer payments or other transactions that are declined “instantaneously or near-instantaneously.” The agency claimed that charging the fee represents an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive or abusive acts or practices.

“The CFPB continues its assault on the banking community,” said MBA President and CEO Jackson Hataway. “In its proposal, the CFPB even acknowledged that NSF fees are rarely charged on transactions that currently take place instantaneously.”

The deadline to submit comments on the proposed rule is Monday, March 25. MBA will submit a comment letter on the proposed rule and highly encourages bankers to do the same.

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