press release

CBA: How the Fed’s Debit Interchange Proposal Will Harm Consumers

Weston Loyd

WASHINGTON, D.C. – The Consumer Bankers Association (CBA) today released a new two-page fact sheet detailing how the original Durbin Amendment harmed consumers and why the new proposed rule from the Federal Reserve would further negatively impact millions of consumers. This new CBA resource comes after U.S. Rep. Blaine Luetkemeyer (R-Mo.) and numerous cosponsors recently introduced the Secure Payments Act of 2024, a bill that will require the Federal Reserve to not advance the proposed Regulation II rulemaking until the Board studies and understands its impacts on consumers.

In 2011, the Federal Reserve Board introduced Regulation II, which implemented the Durbin Amendment to the Dodd Frank Act. By reducing debit interchange revenue, Regulation II showed demonstrable impacts to the availability and cost of free checking accounts. In November 2023, the Federal Reserve Board proposed a rule to further reduce debit interchange revenue, which could lead to higher costs for consumers.

To read the two-page fact sheet, click HERE.

History Shows a Reduction in Interchange Does Not Benefit the Consumer

Banks rely on debit interchange revenue to enhance the technologies used to ensure consumers can use their debit cards to make purchases across the world, protect consumers against fraud, and to expand other bank offerings, such as free or low-cost bank services to their customers. The new proposal from the Federal Reserve seeks to reduce the current debit interchange by 30 percent. While the idea of lowered “fees” may sound appealing, when looking at the history of the Durbin Amendment, it is clear the Federal Reserve’s proposed rule would only increase costs to consumers.

According to a recent Government Accountability Office report, the interchange caps mandated by the Durbin Amendment hampered banks’ ability to offer other vital checking account services for free or low cost, overall increasing costs for consumers including:

  • Average monthly maintenance fees on checking accounts increased by nearly 100 percent.
  • Availability of free checking accounts with no maintenance fees dropped by 33 percent.
  • Average account minimums needed to avoid a monthly fee increased by 20 percent or more, an average monthly increase of $200.
  • Banks were forced to institute minimum balance requirements on a greater share of accounts.

The Impacts of the Federal Reserve’s Proposed Rule

Nick Bourke, former Founder and Director of Consumer Finance at The Pew Charitable Trusts, published a White Paper detailing the potential effects to consumers and excepted outcomes due to the Federal Reserve’s proposed rulemaking:

  • The Federal Reserve’s own economists confidently measured a correlated drop in bank interchange revenue and an increase in fees consumers pay for bank accounts due to the 2010 Durbin Amendment. Lower-income consumers would likely bear a disproportionate share of increased costs.
  • Any corresponding consumer savings under the 2010 Durbin Amendment are contested or not measurable. If merchants passed savings through to consumers, as some proponents suggest, economists concluded it is “virtually impossible” to prove or measure.
  • If the Federal Reserve Board’s current proposal to further reduce debit interchange revenue is finalized, the research suggests consumers will pay an extra $1.3 billion to $2 billion annually in higher bank account fees. Once again, consumers will find it harder to avoid fees, as “free” bank accounts with no maintenance fees become less common and the average minimum deposit required to qualify for fee waivers increases – which may disproportionately affect lower-income consumers.

To read the full White Paper, click HERE.

CBA Advocacy

  • To read CBA’s fact sheet on how the proposed debit interchange rule would harm consumers, click HERE.
  • To read CBA’s initial response to the Federal Reserve Board’s Regulation II proposal, click HERE.


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