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February 26, 2024 • Issue 24:02:02

The year ahead in Washington

By Patti Murphy Since 2011, debit interchange has been capped at 21 cents
and 0.05 percent of the transaction, plus a penny to cover
unk fee reduction, debit cap haircut, reigning in fraud prevention and detection costs. That works out to
big tech payments initiatives: these are just a few about 24.5 cents on a $50 transaction. Now the Fed wants
of the items on the agendas of policymakers in to lower that to 14.4 cents plus 0.04 percent and 1.3 cents
J Washington this year. However, major legisla- to cover fraud prevention and detection. That works out to
tion affecting financial institutions and card services isn't 17.7 cents interchange on a $50 debit card payment.
expected to pass.
The cap applies to any financial institution with $10 billion,
The Credit Card Competition Act, for example, is unlikely or more, in assets, which includes only the very largest FIs.
to see action in what remains of the 118th Congress, which
runs through the end of 2024. That's the legislation draft- A recent white paper, distributed by the Consumer Bank-
ed by Senator Richard Durbin, D-Ill., intended to provide ers Association, claims consumers will be hardest hit if the
merchant choice over which networks card payments are proposal goes through. Similar to what happened after the
processed. original regulations took effect in 2011, FIs will be forced to
recoup lost income through higher account fees, the elimi-
"The bill still faces significant congressional headwinds," nation of free accounts, higher minimum balances and re-
said Scott Talbott, executive vice president at the Electronic duced card rewards.
Transactions Association. On the other hand, there's plenty
of "regulatory overhang" especially related to payments,
Talbott added.

Following is a rundown of key initiatives. Contributed articles inside by:
Debit haircut? More like buzz cut Nick Cuuci................................................................................................28

The Federal Reserve, which was put in charge of capping Mike Harris ..............................................................................................30
debit card interchange by the Durbin Amendment to the Victor Orlovski .......................................................................................32
Dodd-Frank Act, is planning to cut the permissible inter-
change on debit card payments by nearly a third, begin- Ken Musante ..........................................................................................34
ning later this year.

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