The Federal Reserve Board is seeking public comment on a proposal to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction.
This new proposal would also establish a regular process for updating the maximum amount every other year.
The Fed Board is required by law to establish standards for assessing whether an interchange fee received by a large debit card issuer for processing a transaction is reasonable and proportional to certain issuer costs. The board first implemented this requirement in 2011, setting an interchange fee cap for debit card issuers with $10 billion or more in assets.
This new proposal would adjust the interchange fee cap to reflect changes in issuer costs since the rule first took effect. For example, the cap on an average-sized $50 debit card transaction would decline from 24.5 cents under the current rule to 17.7 cents under the proposal. In addition, the Fed proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the board from large debit card issuers.
Fed board member Michelle Bowman expressed some concerns about the proposal in a recent statement.
“In my view, before engaging in a significant regulatory proposal, it is critical to reflect on the broader context, and understand the potential consequences of the revisions. While the proposal suggests that it could result in benefits to consumers, I am concerned that the costs for consumers—through the form of increased costs for banking products and services—will be real, while the benefits to consumers—such as lower prices at merchants— may not be realized,” Bowman said.
Bowman added that while she looks forward to reviewing feedback from the public, she cannot support the proposed revisions to Regulation II’s interchange fee cap and plan for periodic updates.
The comment period will close 90 days after the proposal is published in the Federal Register.