Comments on the Federal Reserve Debit Card Interchange Rule

The Federal Reserve has proposed a rule, based on an amendment to last year's financial reform legislation, which will set the price that merchants pay to accept debit cards (known as the "interchange rate"). The Fed began accepting public comments on the rule on December 17, 2010.

Since that time, the overwhelming majority of comments have expressed opposition to the rule because of the harm it would cause to consumers, small financial institutions, and the American economy.

“Additionally, some concerns have been raised that, despite its intent, the small issuers' exemption may end up creating an unlevel playing field in the industry that hurts small issuers like community banks and credit unions by making their cards more expensive for merchants to accept. Such an outcome would run contrary to the general goal of benefiting consumers and promoting competition that we all share.”

Reps. Spencer Bachus and Jeb Hensarling
December 17, 2010

“Cardholders value the convenience and security of debit cards, but issuers may cease to offer debit cards if regulations require them to operate card programs at a loss. At the same time, there is no guarantee that retailers will pass savings from lower interchange fees on to the consumer.”

Senator Claire McCaskill
December 17, 2010

“I am concerned that implementing regulations for this section, if not properly crafted, may have unintended consequences for consumer choice, the protection of consumer information, and Congress’s intent to reduce burdens on community banks, credit unions, and government benefit programs.”

Rep. Barney Frank
December 15, 2010

“Despite all of our cost savings efforts and our deep desire to continue offering free checking, this will no longer be possible if the debit interchange rate is lowered. We cannot afford to lose the interchange income stream. If that happens, we will be forced to immediately implement minimum account fees.”

Paul Phillips, Freedom First Federal Credit Union
January 13, 2011