Banking Associations Urge Fed to Withdraw Debit Card Fee Proposal

The American Bankers Association and other industry groups requested the Federal Reserve Board withdraw its proposal on debit card interchange fees due to significant legal uncertainty and reliance on outdated information.

The associations argued that the 2023 proposal is dated and does not account for conflicting decisions from federal district courts regarding existing regulation. They claimed that proceeding with a final rule before these legal challenges are resolved would be imprudent, as the court outcomes could require a complete rewrite of the fee standards. The associations also contended that the proposal is flawed because it relies on data from 2021, which no longer supports informed decision-making. They noted that the debit card market has undergone substantial changes since that time, including rapid growth in mobile wallet usage and changes to network rules. They emphasized that any new rulemaking must consider more current data, specifically the 2023 survey data submitted to the Board in May 2024.

The associations also warned that the proposal would amplify economic damage to both financial institutions and consumers. They asserted that the proposed changes would drive up costs for basic deposit accounts, disproportionately harming low-income and underserved consumers. Further, they claimed the proposal arbitrarily omits quantifiable issuer costs and fails to ensure issuers receive a reasonable rate of return. The associations requested that the Board publish the summary data from its calendar year 2023 survey. They said that releasing this data would provide necessary clarity on the current state of the market, particularly regarding significant growth in fraud losses that issuers have reported.