instand issuance

Fed should resist re-opening debit regulation, Durbin changes

February 2, 2022

Attempts to tighten Durbin Amendment regulations would make it increasingly difficult for financial institutions to provide robust core banking services, CUNA and other organizations wrote to the Federal Reserve this week. The letter was sent in response to the Fed’s recent proposal to re-open Regulation II, which covers debit card interchange fees and routing.

“We urge the Board to reconsider its recent proposal to reopen Regulation II and to resist requests from retailers for further changes that would increase the regulatory burden associated with the Durbin Amendment to the Dodd-Frank Act,” the letter reads.

The Durbin Amendment requires the Board to set an interchange cap that is reasonable and proportional to the costs incurred by issuers with respect to debit card transactions.

The organizations note capped interchange fee did not cover the average per-transaction ACS costs (including issuer fraud losses) for 21% of covered issuers, according to the latest debit card cost report released in May 2019.

Most recently, the Board’s Debit Card Issuer Cost Study found that financial institutions with less than $10 billion in assets) experienced a 21% decrease in per-transaction debit card revenue from 2011 to 2019.

“The law’s impacts have been most pronounced for those consumers in need of feature-rich, low-cost basic banking services and that these social costs are not captured in the relevant statistics,” the letter reads.

The organizations also request the Fed report to Congress a conclusion that the Durbin Amendment has “failed to achieve its stated goals, and that the Board recommend its speedy repeal.”