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From Regulators
Government Regulators on the Fed Rule on Debit Interchange
Federal Reserve Chairman Ben Bernanke, Acting Comptroller of the Currency John Walsh, FDIC Chairman Sheila Bair, the National Credit Union Association, the Conference of State Bank Supervisors and the National Association of State Credit Union Supervisors all acknowledge that the Fed’s debit card interchange rule could harm consumers and small financial institutions, and should be examined more carefully.
Community banks and credit unions could be harmed by this rule.
“[The rule is] going to affect the revenues of the small issuers and it could result in some smaller banks being less profitable or even failing.”
– Federal Reserve Chairman Ben Bernanke
“I do think that this is going to reduce revenues at a number of smaller banks and they will have to pass that on to customers in terms of higher fees.”
– FDIC Chairman Sheila Bair
“We believe the proposal takes an unnecessarily narrow approach to recovery of costs that would be allowable under the law and that are recognized and indisputably part of conducting a debit card business. This has a long-term safety and soundness consequences –for banks of all sizes– that are not compelled by the statute.”
– John Walsh, Office of the Comptroller of the Currency
“The current rule’s prohibitions against network exclusivity and merchant routing restrictions could significantly increase both fixed and variable costs for these small institutions, resulting in an inability to remain competitive with larger card issuers.”
– National Credit Union Administration
“If economic pressures force small debit card issues to operate at a 12 cent interchange fee, it is possible that many banks and credit unions will stop issuing cards because their costs do not utilize the same economies of scale as larger financial institutions.”
– Conference of State Bank Supervisors and the National Association of State Credit Union Supervisors
Consumers could be forced to pay more as a result of the rule.
“It’s certainly possible that some of those costs would get passed on to consumers in some way, for example, a charge for a debit card or something like that.”
– Federal Reserve Chairman Ben Bernanke
“If they are forced down to the 12 cent level, that is going to reduce the income that they get for debit cards, so I think they're going to have to make that up somewhere, probably by raising the fees that they have on transaction accounts. . . That would not be helpful for consumers and that might be an unintended consequence.”
– FDIC Chairman Sheila Bair
The implementation of the rule should be delayed to allow for more careful study.
“I think the full policy ramifications, who's paying for what, who's going to pay more, and who's going to pay less under this is something that maybe wasn't dealt with as thoroughly as it might have been.”
– FDIC Chairman Sheila Bair
“We agree with you. This -- this really needs to be fixed.”
– FDIC Chairman Sheila Bair