WASHINGTON, D.C.—Phillip Basil, Director of Banking Policy at Better Markets, released the following statement on the filing of a comment letter to the Federal Reserve Board on proposed clarifications to its debit card transaction policy, Regulation II:
Today Better Markets filed a comment letter to the Federal Reserve Board supporting its proposed clarifications to its Regulation II that would help to ensure competition for ‘card-not-present’ debit card transactions, such as online purchases. Recent years have seen substantial growth in such transactions, particularly over the COVID-19 pandemic, and the proposed clarifications would promote lower associated fees for merchants and consumers.
The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the Fed to regulate debit card transactions to ensure that the banks issuing debit cards charge reasonable interchange transaction fees, as well as ensure businesses have a choice of payment card networks to route debit card transactions.
However, the Fed has found that the banks that issue debit cards are failing to ensure businesses can choose from more than one network when routing card-not-present debit card transactions. With consumers conducting fewer and fewer cash transactions, the Federal Reserve should implement its proposed changes as soon as possible to promote healthy competition in the payment industry for these types of transactions.
“In addition, although not in the scope of the proposal, the applicability threshold for the limit on debit card interchange fees ($10 billion in total assets) could have unintended consequences, particularly with the involvement of financial technology companies. As such, Better Markets recommends that the Board analyze and assess the potential issues caused by the threshold and report findings to the public and lawmakers.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.