{"id":28945,"date":"2024-01-12T10:51:27","date_gmt":"2024-01-12T16:51:27","guid":{"rendered":"https:\/\/bankbeat.biz\/?p=28945"},"modified":"2024-01-12T10:51:27","modified_gmt":"2024-01-12T16:51:27","slug":"fed-council-withdraw-proposed-interchange-fee-revamp","status":"publish","type":"post","link":"https:\/\/bankbeat.biz\/fed-council-withdraw-proposed-interchange-fee-revamp\/","title":{"rendered":"Fed council: Withdraw proposed interchange fee revamp"},"content":{"rendered":"

The Community Depository Institutions Advisory Council is calling on the Federal Reserve to withdraw its proposed revamp of interchange fees, according to minutes of the council\u2019s <\/span>Nov. 16 meeting<\/span><\/a>.\u00a0<\/span><\/p>\n

The proposal, which the Fed introduced in October, would tighten the limit on debit card interchange compensation that banks earn. The revamp would <\/span>lower Durbin Amendment caps<\/span><\/a> in Regulation II to 14.4 cents and .04 percent of a transaction, plus a 1.3 cents fraud-prevention adjustment. The change from the current rate \u2014 21 cents and .05 percent of the transaction, plus a one-cent fraud-prevention adjustment \u2014 would be effective June 30, 2025.\u00a0<\/span><\/p>\n

The CDIAC, which provides community bank-focused input to the Federal Reserve Board, said the plan raises sustainability issues for community and regional banks hoping to stay independent. Members called on the Fed to only reintroduce the proposal after conducting a sufficient cost-benefit analysis.<\/span><\/p>\n

The proposal would only apply to debit card issuers with at least $10 billion in consolidated assets. According to the Advisory Council, the associated revenue reductions that those banks face could encourage smaller banks to reduce their lending to stay under the limit.\u00a0<\/span><\/p>\n

The change could also reportedly cause more mergers as banks consolidate instead of growing independently to dilute the lost revenue as part of a larger bank.<\/span><\/p>\n

According to the Advisory Committee, the reduction in fee income harms the funding mechanism banks utilize to offer free checking and cover increases in operating expenses, which community depository institutions use to implement fraud prevention and mitigation measures.\u00a0<\/span><\/p>\n

\u201cEven for those CDIs not subject to Regulation II, competitive pressures from larger banks mean that fee limitations affect CDIs,\u201d the minutes stated. \u201cIf fees continue declining, at some point, CDIs will begin to curtail customer services.\u201d\u00a0\u00a0<\/span><\/p>\n

According to the Advisory Committee, the routing provisions also impact the fraud protection and liability frameworks of all CDIs. \u201cCouncil members noted the opaque nature of these practices, and generally believe that the Regulation II proposal is picking winners \u2014 merchants \u2014 and losers \u2014 banks \u2014 with no evidence of customer benefit,\u201d according to the minutes.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

Those concerns came amid broader CDIAC pushback against regulations issued in the past 10-15 years. \u201cRegulatory efforts are simply helping to speed up the trend toward greater industry consolidation, contradicting the current administration\u2019s interest in promoting competition in the banking industry and having a viable CDI business model,\u201d the minutes stated.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The Community Depository Institutions Advisory Council is calling on the Federal Reserve to withdraw its proposed revamp of interchange fees, according to minutes of the council\u2019s Nov. 16 meeting.\u00a0 [Continue] <\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"generate_page_header":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[142],"tags":[380],"yoast_head":"\nFed council: Withdraw proposed interchange fee revamp - BankBeat<\/title>\n<meta name=\"description\" content=\"The Community Depository Institutions Advisory Council is calling on the Federal Reserve to withdraw its proposed revamp of interchange fees, according to minutes of the council\u2019s Nov. 16 meeting.\u00a0\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/bankbeat.biz\/fed-council-withdraw-proposed-interchange-fee-revamp\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fed council: Withdraw proposed interchange fee revamp - 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