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Worse, Governor Bowman added, the change will force
Insider’sreport banks to raise fees, which in turn could disenfranchise
lower-income consumers who rely on low-cost checking
on payments accounts tied to debit cards (no checks).

"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
Fed plans debit lower prices at merchants – may not be realized," Bowman
wrote. In fact, she added, some banks may be forced to
cap haircut scale back low-cost product offerings, "including options
to increase financial inclusion and access for low- and
moderate-income individuals and families."
By Patti Murphy While the cap is only supposed to apply to large financial
ProScribes Inc. institutions, Bowman and others have raised concerns
about the impact on community banks.
ebit card issuers may want to start bracing for
the fallout from the Federal Reserve Board's "[T]he agency's cap on debit interchange puts smaller card
latest regulatory initiative: driving down debit issuers at a disadvantage due to their smaller transaction
D interchange rates. In a proposal now out for volumes and lower negotiating power relative to large
public comment, the Fed said it wants to slash the regu- issuers," said Rebeca Romero Rainey, president and CEO of
lated debit interchange cap by better than 30 percent. If the the Independent Community Bankers of America. "Durbin
proposal is adopted as laid out, the new cap would kick in Amendment price controls on debit card interchange have
mid-year 2025. distorted the debit card and consumer checking markets
solely to the benefit of big-box retailers, such as Walmart,
The plan is to lower the cap to 14.4 cents plus 0.04 percent Target and Amazon."
(4 basis points) of the transaction amount, along with 1.3
cents to cover fraud prevention costs. Since 2011, the cap In a statement, Rainey pointed to a Federal Reserve Bank of
has been 21 cents and 0.05 percent, plus a penny to cover Richmond study that indicated merchants pocketed billions
fraud costs. of dollars in savings when the Fed capped debit interchange
back in 2011; fewer than 10 percent of merchants reported
Under this proposal, the interchange on a $50 debit card passing savings from lower interchange on to customers in
transaction would drop from 24.5 cents today to 17.7 cents, the form of lower prices.
the Fed explained in a press release. And get this, going
forward the Fed wants to adjust the cap every two years, For its part, the National Retail Federation, which has been a
based on its own data analysis and without the benefit of major lobbying force in Washington for lower interchange,
public comment. said the haircut the Fed is proposing for debit interchange

Fed can't get no satisfaction isn't enough. "[I]t still doesn't get to the 'reasonable' level
Congress sought" with the Durbin Amendment, Stephanie
By way of background, the Fed was charged with regulating Martz, NRF CEO, said in a statement.
debit interchange under the Durbin Amendment to the What the data says
2010 Dodd-Frank Act, the omnibus legislation enacted in
the wake of the 2008 financial crisis. But it did not apply In a document explaining its proposal, the Fed said the cap
to all financial institutions; only those with $10 billion or reduction was based on an analysis of debit card activity
more in assets are subject to caps set by the Fed. in 2021. Following are highlights, according to a report the
Fed published along with the proposed cap change.
The cap, which has remained unchanged for the past 12
years, amounted to a compromise that did little to quell • Payment card networks processed 92.1 billion debit
the imbroglio over interchange. No party—not the banks, and general use prepaid debit card transactions
issuers or merchants—likes the notion of what amounts to valued at $4.3 trillion in 2021.
government price controls.
• Dual-message networks (where transactions are
The Fed's latest move is drawing criticism from banks signature authorized) dominated, with 68.2 percent
(arguing it's too much of a haircut), merchants (who want of debit card processing volume and 70.4 percent of
the cap to be lower) and even from within its own ranks. Fed debit card dollars processed.
Governor Michelle Bowman, in a statement for the record,
asserted the proposal "aims to achieve 'rough justice' by • The "average fee" for processing regulated debit over
single-message networks was 24 cents; the average
establishing a single cap that applies to all covered issuers."
was 23 cents for dual-message networks in 2021.
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