A group of Republican U.S. Senators earlier this week joined House members in a campaign to “pause” the Federal Reserve’s plan to lower a cap on fees that bank card issuers can charge merchants on consumer debit transactions.

Senators Ted Budd (R-NC), Thom Tillis (R-NC), Steve Daines (R-MT), Bill Hagerty (R-TN) and Katie Britt (R-AL) cosponsored the bill on Tuesday, pointing in a press release to negative repercussions for consumers since the initial cap was introduced in 2011. 

The bill calls on the Federal Reserve to conduct a “quantitative impact analysis” of the rule proposal and submit a report to Congress before finalizing the edict. The analysis must assess the impact on consumers’ access to free or low-cost deposit accounts; costs for merchants that accept debit cards; and expenses for banks that issue cards in seeking to mitigate fraud.

In a statement, the Republicans drew a connection between lowering the fees that can be charged for those debit card services and a decline in free, or low-cost services, for consumers. The number of free checking accounts has declined, checking account fees have increased and some households have closed checking accounts because fees were too high or unpredictable, they argued in the Tuesday release from Budd, without providing statistics. His office didn’t respond to an interview request.

A pack of bank interest groups support the legislative proposal, the release noted. They include the American Bankers Association, America’s Credit Unions, and the Bank Policy Institute.

Still, retailers who pay the fees aren’t supportive. The Retail Industry Leaders Association derided the bill in a Tuesday statement from Executive Vice President Austen Jensen.

“Banks are crying poverty while simultaneously acknowledging cutting off millions of low-income Americans from affordable checking and savings accounts, despite racking up record profits over the past decade,” the statement said. 

A companion bill was introduced in the House in March by Republican Rep. Blaine Luetkemeyer of Missouri and referred to the House Committee on Financial Services. It has since attracted support from 13 additional Republican House members.

The Fed’s proposal would lower the base debit fee rate that merchants are charged by about a third to 14.4 cents, from 21 cents, according to an October memo produced by the Fed’s staff. Additional changes to what is known as Regulation II under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, would adjust the amounts that bank card issuers can charge to cover fraud costs and to counter fraud losses.

The fee cap and the proposal would apply only to debit card issuers, which are generally banks and credit unions, that have $10 billion or more in deposits.

Currently, the cap is set at 21 cents plus 0.05% of the value of the debit transaction, in addition to a one-cent fraud-prevention adjustment.

By Lynne Marek on June 20, 2024
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