CUs, Banks Support Bill to Stop Fed’s Debit Interchange Proposal

Officials with America’s Credit Unions and the banking industry have voiced their distain over the Federal Reserve’s Regulation II Debit Card Interchange Fee proposal over the past several months. On Tuesday, credit unions and banks received a possible lifeline to stopping the proposal in the form of the “Secure Payments Act” introduced by Sen. Ted Budd (R-N.C.).

The Fed’s proposal, which has the backing of retailers and many consumer groups, would require the Federal Reserve to issue regulations to ensure that large financial institutions cannot restrict the number of networks on which an electronic credit transaction may be processed to less than two unaffiliated networks, at least one of which must be outside of the top two largest networks, which are Visa and Mastercard.

Sen. Budd’s bill “would require the Federal Reserve to pause its Regulation II Debit Card Interchange Fee proposal until it completes a full quantitative impact study of its effects on consumer costs and the wider economy.”

Sen. Budd said, “The Federal Reserve’s Regulation II is a misguided policy that hurts everyday North Carolinians, especially those in minority communities. Indiscriminately imposing government price caps on debit card services makes it harder for people to open bank accounts and forces banks to end popular perks like free checking. Before the Federal Reserve moves forward with this proposal, they must take into account the damage it will do to consumers across the country.”

Sens. Thom Tillis (R-N.C.), Steve Daines (R-Mont.), Bill Hagerty (R-Tenn.) and Katie Britt (R-Ala.) have signed on to the bill in support. A similar version of bill was introduced in March by Rep. Blaine Luetkemeyer (R-Mo.).

In a statement of support for Sen. Budd’s efforts, America’s Credit Unions President/CEO Jim Nussle said, “Credit unions need access to as many resources as possible to provide critical services in rural and underserved communities across America, and we’ve already seen that debit interchange restrictions limit those resources and ultimately hurt consumers.”

Nussle added, “The Federal Reserve’s proposal to reform all three components of the Regulation II interchange fee cap deserves a study to fully understand its potential consequences. Senator Budd has been a friend in this fight, and we thank him for introducing a commonsense piece of legislation that will bring real time data and evidence to the Federal Reserve’s effort. America’s Credit Unions looks forward to supporting policies that allow people to live their best financial lives.”

In addition to America’s Credit Unions, seven other organizations including the Carolinas Credit Union League (CCUL), the Defense Credit Union Council (DCUC) and the American Bankers Association have signed on to support Sen. Budd’s bill.

CCUL President/CEO Dan Schline said, “This important legislation would require the Fed to stop and appropriately scrutinize the harmful impact of their misguided proposal to reduce the regulated interchange cap under Regulation II on credit unions and other banking services. The Fed’s proposal to further reduce debit interchange fees under Regulation II is just one of many new federal regulations that would have tangible, and potentially detrimental, consequences for credit unions of all sizes, their members and their communities.”

In a prepared statement, DCUC’s Chief Advocacy Officer Jason Stverak said, “It’s important that credit unions are provided with accessible financial resources, especially in underserved communities nationwide. Recent months have highlighted how limitations on debit interchange fees impact these resources, and consequentially, consumers’ financial security. DCUC fully supports Senator Budd’s call for a study of the interchange fee cap because of these reasons.”