Fed Will Release Interchange Rule on June 29 (Misc News: June 21, 2011)
The Federal Reserve will announce the final rule for debit interchange on Wednesday, June 29, less than a month before it is scheduled to take effect.
The Fed did not offer any details on the final rule.
Also on Tuesday, the American Bankers’ Association called on the Fed to essentially delay implementation of the new interchange rule by at least three months to give financial institutions time to comply.
The Fed announced that the staff memo to the Fed board will be made available to the public about 20 minutes prior to the meeting and the background material will be made available on compact disc. Click here to see the Fed’s announcement.
The Wall Street Journal reported Tuesday that ABA President Frank Keating’s letter to Fed Chairman Ben Bernanke called on him “to use its existing authority to deem institutions in compliance with any new rule for some appropriate period in order to provide banks and payment networks with a reasonable chance to meet their obligations under the law.” That period, he added, “should be no less than the three-month window envisioned by the statute as enacted.”
The debit interchange rule is scheduled to take effect on July 21, a year after it was passed by Congress as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Earlier this month, financial institutions lost a hard-fought battle in the U.S. Senate to have the interchange rule delayed so it could be studied and modified if needed. The measure garnered 54 votes, six shy of the 60 needed to defeat a promised filibuster by its champion, Sen. Dick Durbin, D-Ill. Privately, some senators have said they will step in if the Fed did not come up with a better rule than the one it first proposed in December.
The final rule was due to be released on April 21, three months before implementation, but Bernanke said in before the deadline that the Fed would miss it because of the large volume of extremely complex commentary it had received on its proposed rule.
Financial institutions would be allowed to charge no more than 12 cents per transaction for interchange under the proposed rule. Right now, interchange fees average about 44 cents per transaction. Some experts have said that the Fed did not take into consideration fraud prevention or other costs when it made its proposed rule, but some observers have said that the law doesn’t allow the Fed to consider those costs.
Small institutions, including almost all of the country's credit unions, would be exempt from the cap, but many credit union supporters do not believe that the exemption will work in the marketplace.