In recent weeks, there has been a flurry of negative reaction to the Federal Reserve's proposed rules implementing the Durbin Amendment of the Dodd-Frank Act. The Durbin Amendment was intended to regulate interchange fees for electronic debit transactions ("Interchange Fees"). The Federal Reserve proposed a cap on Interchange Fees of seven-to-twelve cents per transaction (the "Proposed Cap"). The Proposed Cap is 84 percent less than the current average of 44 cents per transaction, and is considerably lower than what most analysts thought the Federal Reserve would propose.
In response to the Proposed Cap, many financial institutions, both large and small, warned that such a drastic cut in fees would result in some financial institutions ceasing debit card issuance and, ultimately, in higher costs to consumers as financial institutions that continue to issue debit cards increase fees in an effort to compensate for the loss of revenue. The acting Comptroller of the Currency, John Walsh, stated in a letter to the Federal Reserve that the Proposed Cap could result in "long-term safety and soundness consequences for banks of all sizes. . . ." In addition, the Federal Deposit Insurance Corporation (the "FDIC") also commented on the Proposed Cap, stating that such a cap could result in "a loss of income for community banks and ultimately higher banking costs for their customers."
In an indication of just how detrimental financial institutions think the Proposed Cap will be to their businesses, more than 900 representatives of financial institutions expressed their concerns to various U.S. representatives and senators in mid-March.
The criticism of the Proposed Cap has not been limited to various bank regulators and financial institutions. The NAACP wrote a letter recently to House Speaker John Boehner detailing its concerns with the Proposed Cap. The NAACP explained that it is concerned about "the potential impact . . . the proposed rule could have on the ability of low- and moderate-income consumers to gain access to affordable small bank products and services."
With so many disparate groups voicing concerns about the Proposed Cap, it is not surprising that the new Congress is also adding its voice to the debate. On March 15, Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) introduced a bill that would delay the implementation of the Proposed Cap for two years. Additionally, the proposed bill would require the Federal Reserve, the FDIC, the Comptroller of the Currency, and the National Credit Union Administration jointly to submit a report to Congress on the impact of regulating Interchange Fees. Whether the new Congress will be successful in its "reform of the reform" remains to be seen.