On August 11, 2021, Better Markets filed a comment letter on the Federal Reserve’s proposal to clarify its debit card transaction regulation (Regulation II). Better Markets strongly supports the Federal Reserve’s proposal as it will help ensure a healthy level of competition within the debit card payment market, which will promote lower interchange fees that will benefit businesses and consumers.
The Durbin Amendment in the Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the Fed to regulate debit card transactions to ensure reasonable and proportional costs of swipe fees charged by the banks that issue the debit cards, also known as interchange transaction fees, as well as to ensure businesses are able to have a choice of card and payment networks to route debit card transactions. In 2011, the Federal Reserve finalized Regulation II to implement these requirements of the Durbin Amendment.
The COVID-19 pandemic has generated tremendous growth in the use of debit card transactions, particularly of card-not-present transactions such as online purchases. However, the Fed has found that the banks that issue debit cards are failing to ensure businesses can choose more than one network when routing card-not-present debit card transactions. Its recent proposal would clarify the language of Regulation II to ensure compliance. With consumers continuing to shift away from cash transactions, the Federal Reserve should implement its proposed changes as soon as possible to encourage healthy competition in the payment industry for card-not-present debit card transactions.
Read our full comment letter here.