Debit interchange rule would create financial industry confusion and hurt consumers
Credit unions are again calling for the Federal Reserve to withdraw its proposed interchange rule, pointing to a recent court decision that complicates how it could be administered. A district court invalidated the Fed’s Regulation II interchange fee standard in August, finding it unlawfully allowed recovery of costs beyond the incremental authorization, clearance, and settlement costs specified in the Durbin Amendment.
America’s Credit Unions wrote to the Fed Wednesday outlining these concerns, noting “the court’s ruling complicates the administration of any future rule based on the Board’s 2024 proposal which is premised on the assumptions about allowable costs (i.e., categories other than incremental ACS costs) which are likely to be part of the ongoing litigation.”
It added that though the court indicated its ruling would not preclude issuance of a final rule, “the defects identified by the district court would remain unresolved, and proceeding with a final rule on such shaky ground would only create confusion for industry while granting a windfall to merchants, who would reap unjust cost savings from a rule that is both unlawful (by the district court’s reasoning) and subject to concurrent litigation in a different circuit.”
The letter reiterates America’s Credit Unions’ longstanding concerns with the interchange proposal itself, as it is “predicated on flawed methodology that disregards the cost experience of most issuers,” especially smaller credit unions.
“The ultimate effect of reducing interchange revenue will be felt mostly by the member-owners of credit unions who will see a reduction in the availability of affordable banking products and services,” it reads.
