Senator Ted Budd (R-NC) has introduced the Secure Payments Act, which would require the Federal Reserve to pause its Regulation II Debit Card Interchange Fee proposal until it completes a full quantitative impact study of its effects on consumer costs and the wider economy.
“The Federal Reserve’s Regulation II is a misguided policy that hurts everyday North Carolinians, especially those in minority communities,” says Senator Ted Budd.
“Indiscriminately imposing government price caps on debit card services makes it harder for people to open bank accounts and forces banks to end popular perks like free checking.
Before the Federal Reserve moves forward with this proposal, they must take into account the damage it will do to consumers across the country.”
Background:
Regulation II was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 and imposed by the Federal Reserve.
The regulation placed arbitrary caps on the price retailers pay for debit card services. In October 2023, the Federal Reserve issued a new proposal to further lower debit card interchange caps.
Since implementation of debit interchange fee price caps in 2011:
The percentage of banks and credit unions offering free checking accounts declined from 60% to less than 20%.
Checking account fees for regulated institutions more than doubled.
According to a 2017 FDIC Survey of Unbanked and Underbanked Households, nearly 30% of respondents who previously had accounts reported that they were forced to close them because fees were too high or unpredictable.
The bill is also sponsored by Senators Thom Tillis (R-NC), Steve Daines (R-MT), Bill Hagerty (R-TN), and Katie Britt (R-AL).
“Credit unions need access to as many resources as possible to provide critical services in rural and underserved communities across America, and we’ve already seen that debit interchange fee restrictions limit those resources and ultimately hurt consumers,” says America’s Credit Unions President and CEO Jim Nussle.
“The Federal Reserve’s proposal to reform all three components of the Regulation II interchange fee cap deserves a study to fully understand its potential consequences. Senator Budd has been a friend in this fight and we thank him for introducing a common sense piece of legislation that will bring real time data and evidence to the Federal Reserve’s effort.
America’s Credit Unions looks forward to supporting policies that allow people to live their best financial lives.”
“In recent months, we have seen broad pushback from consumer advocates, legislators, and industry on the Federal Reserve’s misguided proposal to dramatically reduce debit interchange fee revenues under Regulation II,” continues Lindsey Johnson, CEO & President Consumer Bankers Association.
“As such, it’s imperative that this proposal be put on pause and the negative real-world impacts be studied before it’s finalized, which is what Sen. Ted Budd’s legislation would require.
We have 13 years of data that demonstrates that this proposal would result in reduced consumer access to free checking accounts, and other essential banking services, which is what happened with the original Regulation II proposal in 2011.”
The bill is supported by:
American Bankers Association
America’s Credit Unions
Bank Policy Institute
Carolinas Credit Union League
Consumer Bankers Association
International Bancshares Corporation
Independent Community Bankers of America
North Carolina Bankers Association
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