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Fed extends interchange fee comment deadline

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Inside the Beltway
Tuesday, January 30, 2024

The Federal Reserve announced it will extend the comment period for its proposed rule on interchange fees amid pushback from financial services advocates. The proposal would lower the maximum interchange fee receivable by large debit card issuers per transaction and establish a system for annual fee adjustments going forward.

Specifically, the proposal would update the three components of the interchange fee cap under Regulation II, based on the latest data reported by large debit card issuers and implement a set of technical revisions to the regulation. The cap would then be updated every other year by directly linking the interchange fee cap to data from the Fed’s biennial Debit Card Issuer Survey.

The Fed decided to extend the comment deadline by 90 days, from Feb. 12 to May 12, to allow interested parties more time to offer feedback about the proposed rule.

“We welcome the additional time to analyze data provided by the Fed and gather current and historical data to support our very serious issues with this proposal,” America’s Credit Unions President and CEO Jim Nussle said in a statement responding to the deadline extension. “We remain strongly opposed to any regulatory or legislative efforts to exert additional government controls into the current interchange system, and the data will back up our concerns.”

In a joint letter to the Fed, 10 industry trade associations urged the Fed to extend the comment deadline to evaluate the implications of the Fed’s notice of proposed rulemaking (NPRM) following its issuance in November. The trades noted that the Federal Register suggests certain complex NPRMs should come with 180-day comment periods.

“To thoughtfully opine on the NPRM, the associations need this additional time to collect current and historical data from our members and analyze such data against the board’s proposed interchange fee caps,” the associations wrote. “The data presented to support the board’s proposal is complex, dated, and incomplete, requiring the private sector to invest significant time to digest and supplement it. Moreover, the NPRM coincides with a number of other major rulemaking proceedings that impact our members.”

The trades further asserted the need for more time to assess the “interplay between these rulemakings and the holistic impact” on their members, consumers and financial markets. Additionally, they noted the timing of the NPRM, which coincided with the start of the holiday season, cut into the amount of time financial professionals had to review the proposal. 

The trades also noted the Fed has yet to release the underlying disaggregated data and empirical analysis used in determining the proposed maximum interchange fee cap and future cap adjustments.

“Without this information, it is difficult to replicate the analysis in any meaningful way, significantly hindering the public’s ability to comment on the methodology proposed,” the trades wrote. “The associations understand that releasing the data on which the board has relied may raise confidentiality concerns; accordingly, we request only that the board release the disaggregated data in a manner that is anonymized to the extent necessary to protect confidential bank and credit union information. Such disclosure is consistent with bedrock principles of administrative law.”

The letter was endorsed by the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, Electronic Payments Coalition, Independent Community Bankers of America, Mid-Size Bank Coalition of America, National Association of Federally-Insured Credit Unions, National Bankers Association and The Clearing House.

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