Larkin Roll Call Op-Ed: Doomsday Predictions Over Debit Reforms Were Off
On March 20, 2012 N.G.A. President and CEO Peter Larkin had an op-ed run in the Capitol Hill newspaper, Roll Call, on the year anniversary of debit reforms. Read the full text HERE.
On Wednesday June 29, 2011 the Federal Reserve issued final rules that establish reasonable and proportional standards for a debit interchange fee. The rule also required issuers to include two non-affiliated debit networks on each card for the purpose of routing. N.G.A. has prepared a brief summary of the Final Rule available here.
Senate Votes to Maintain Debit Swipe Fee Reforms
On June 8, 2011 the Senate REJECTED an amendment by Senators Jon Tester (D-MT) and Bob Corker (R-TN) to delay the implementation of debit swipe fee reforms. If this amendment had received the 60 votes it needed to proceed debit swipe fee reforms would likely have been lost. Please help thank the 45 Senators that stood up for Main Street businesses in voting NAY on the Tester-Corker Amendment. Thanks to all members that sent in grassroots messages to their elected officials. You made the difference!
The Federal Reserve will release its final regulations on Wednesday June 29. N.G.A. will have an analysis of the regulations after they are released.
N.G.A. Files Comments in Support of Federal Reserve's Proposed Rule
On February 22, 2011 N.G.A. filed public comments with the Federal Reserve in support of the Board's Proposed Rule on debit interchange fees. The Board's Proposed Rule would, among other things, set a "safe harbor" of .07 cents with a cap of .12 cents for debit interchange fees.
N.G.A.'s Public Comments Filed with Federal Reserve (.pdf 207 kb)
Federal Reserve Issues Proposed Rule on Reasonable and Proportional Debit Interchange Fees
The Federal Reserve Board on Thursday requested comment on a proposed rule that would establish debit card interchange fee standards and prohibit network exclusivity arrangements and routing restrictions.
The Board's proposal would implement the debit card interchange fee and routing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Debit card interchange fees are established by payment card networks and paid by merchants to card issuers for each transaction.
The proposed new Regulation II, Debit-Card Interchange Fees and Routing, would establish standards for determining whether a debit card interchange fee received by a card issuer is reasonable and proportional to the cost incurred by the issuer for the transaction. These standards would apply to issuers that, together with their affiliates, have assets of $10 billion or more. Certain government-administered payment programs and reloadable general-use prepaid cards would be exempt from the interchange fee limitations.
The Board is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer's costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a stand-alone cap (initially set at 12 cents per transaction). Under both alternatives, circumvention or evasion of the interchange fee limitations would be prohibited. The Board also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.
If the Board adopts either of these proposed standards in the final rule, the maximum allowable interchange fee received by covered issuers for debit card transactions would be more than 70 percent lower than the 2009 average, once the new rule takes effect on July 21, 2011.
The proposed rule would also prohibit all issuers and networks from restricting the number of networks over which debit card transactions may be processed. The Board is requesting comment on two alternative approaches: one alternative would require at least two unaffiliated networks per debit card, and the other would require at least two unaffiliated networks per debit card for each type of cardholder authorization method (such as signature or PIN). Under both alternatives, the issuers and networks would be prohibited from inhibiting a merchant's ability to direct the routing of debit card transactions over any network that the issuer enabled to process them.
According to the recently released 2010 Federal Reserve payment study, debit card use in the United States now exceeds all other forms of noncash payments and, by number of payments, represents approximately 35 percent of total noncash payments. Comments on the proposal are due by February 22, 2011.
N.G.A. Press Release (.pdf 483 kb)
View the Proposed Rule (.pdf 394 kb)
MPC Letter to Congress (.pdf 64 kb)
Interchange Reforms Become Law
On July 21, 2010 President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, ushering in sweeping reforms of the banking industry including significant reforms of interchange fees. The legislation directs the Federal Reserve to write regulations no later than nine months from enactment of the law to establish standards for a number of provisions in the new legislation.
To view a N.G.A. Member Special Report on the reforms click here. (.pdf 50 kb)
On July 15 the Senate passed the conference report to the Dodd-Frank Wall Street Reform and Consumer Protection Act after securing the votes of Republican Senators Scott Brown (MA), Olympia Snowe (ME), and Susan Collins (ME).
Senate Roll Call Vote on Final Passage
July 15, 2010 N.G.A. Press Release (.pdf 500 kb)
Summary of Interchange Provisions in the Final Bill (.pdf)