Newly introduced Senate legislation to force the Federal Reserve to withdraw its rule limiting credit card interchange fees echoes the sentiment of a similar bill introduced in the House earlier this year. The “Secure Payments Act of 2024” would require the Fed to conduct more research on the underlying reasoning behind the rule’s proposed changes to Regulation II before finalizing it.
The new measure was introduced by Sen. Ted Budd (R-N.C.) and would task the agency specifically with measuring the rule’s impact on consumers, including access to affordable debit accounts, and the economy. The legislation is being viewed as a companion bill to H.R. 7531, which Rep. Blaine Luetkemeyer (R-Mo.) introduced to the House in March.
The Fed’s rule would reduce the maximum interchange fee debit card issuers with at least $10 billion in assets are permitted to receive for debit card transactions under Regulation II. The rule also would establish a recurring process for revising the fee cap every other year based on issuer cost data.
“The Federal Reserve’s Regulation II is a misguided policy that hurts everyday North Carolinians, especially those in minority communities,” Budd said in a statement. “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.”
Several industry trade organizations representing banks and credit unions have expressed support for the legislation.
“The Federal Reserve’s debit card proposal doesn’t use full and complete data from community banks, ignores its potential impact on fraud controls, and could jeopardize access to low-cost and no-cost banking services in the local communities that community banks serve,” Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey said in a statement. “ICBA and the nation’s community banks strongly support Sen. Budd’s Secure Payments Act of 2024 to require the Fed to study the impact of its proposal on consumers, community banks, and access to deposit accounts, and we thank him for introducing this important legislation in the Senate.”
Consumer Bankers Association President and CEO Lindsey Johnson pointed to “pushback from consumer advocates, legislators, and industry” on the proposal in recent months, asserting that the rule is “misguided” on the Fed’s part.
“As such, it’s imperative that this proposal be put on pause and the negative real-world impacts be studied before it’s finalized, which is what Sen. Ted Budd’s legislation would require,” Johnson said in a statement. “We have 13 years of data that demonstrates that this proposal would result in reduced consumer access to free checking accounts, and other essential banking services, which is what happened with the original Regulation II proposal in 2011. We’re thankful for Sen. Budd’s leadership on this important issue and urge Congress to pass this legislation to protect millions of American consumers.”
America’s Credit Unions President and CEO Jim Nussle issued a statement saying the restrictions imposed by the rule would hinder credit unions’ ability to provide services to underserved areas.
“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 said. “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. Sen. 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.”
American Bankers Association President and CEO Rob Nichols and Bank Policy Institute President and CEO Greg Baer cited similar concerns about the rule in statements included on Budd’s website.