Federal Reserve Governor Michelle Bowman expressed concern with the Fed’s interchange proposal in remarks before the Ohio Bankers League this week, calling it “unfair to many issuers and in some ways regressive in its impacts,” at its heart.

The Fed’s proposal would alter components of the interchange cap, including lowering the base and ad valorem components. CUNA, Leagues, and credit unions strongly oppose any changes to interchange caps, noting while the current system works well, it does not cover all the costs of running a card program.

Bowman said cutting into those costs means issuers would need to look elsewhere to cover program costs, which could mean less affordable borrowing.

“Higher borrowing costs or fees could be particularly harmful for low-income customers who may not qualify for credit card products or other alternatives, as banks may be forced to discontinue their lowest-margin products, including options designed to increase financial inclusion and access for [low-and middle-income] individuals and families,” she said.

Despite the proposal applying only to financial institutions with $10 billion or more in assets, CUNA noted that the Durbin Amendment’s similar cap had massive impacts on all card issuers, including those below the asset threshold.

Bowman echoed those concerns in her remarks.

“The proposal applies only to a subset of issuers—those with more than $10 billion in assets—but I expect the fee cap will continue to affect a broader range of issuers, including community banks and small credit unions,” she said. “Issuers of all sizes use the same payment rails, and smaller issuers will inevitably face some pricing pressure, at least indirectly, from the interchange fee cap.”

Bowman shared similar concerns at the October meeting when the Fed issued the proposal.