Key Findings

The Fed acknowledges that consumers could be hurt by this rule.

“Under either alternative, the interchange fee standard would not limit the ability of an issuer to receive revenue from other sources, such as by charging fees to its cardholders.” (p. 7)

“However, any savings that consumers might realize at point of sale could be offset by fee increases at their banks, as well as changes in terms that debit cardholders face for card use and deposit accounts. So, specifically, account holders at covered institutions may face higher fees for debit card use or additional account fees, and . . . one of the first things that issuers may do is reduce or eliminate debit card reward programs, and these changes that may happen at the bank may be somewhat more visible to consumers than any savings that they realize at the point-of-sale.” (Transcript, Federal Reserve Board Meeting, December 16, 2010)

The Fed was not allowed to consider any costs that were not directly applied to a particular transaction – creating an extremely limited and circumscribed rule.

“[The amendment] requires the Board to consider the incremental cost of authorization, clearance and settlement of a particular transaction, but prohibits the Board from considering other costs that are not specific to a particular transaction.” (p. 5)

The Fed openly expresses concern about the timeframe of the rule – particularly the fraud section – and doubts that it can be completed and implemented in time.

“Staff recommends that the proposed regulatory text include a reserved section for a fraud adjustment in order to allow the Board to collect additional information to construct an appropriate proposal . . . while this might delay adoption of a final rule on the fraud adjustment beyond April 2011, it is likely to result in a better crafted and supportable decision.” (p. 12)

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