Joint Trades Letter to the Federal Reserve Board on Financial Sector Opposition to Reopening Regulation II

Dear Chair Powell:

The undersigned nine trade organizations represent a broad coalition of federally regulated financial institutions, including community banks, credit unions, and military financial institutions who are concerned about regulatory actions impacting the sustainability and affordability of core deposit account services.

We write to urge the Board of Governors of the Federal Reserve System (“Board”) to rejectmerchant requests for the Board to propose further changes to Regulation II (Debit CardInterchange Fees and Routing).

Our letter to you today is prompted by a Sunshine Act Notice (“Notice”) that indicates that theBoard will meet on Wednesday, October 25 to discuss “[p]roposed revisions to the Board’sdebit interchange fee cap.” The Board has not released details of this scheduled discussion onpotential revisions. To enable transparent and rigorous policymaking on a decision of thisimportance to American consumers, we respectfully request that this documentation be madeavailable to the public this week.

Further, we are concerned that the Board has not collected and published comprehensive andcurrent data about the costs of Regulation II on regulated entities and their checking accountconsumers prior to undertaking further debit card policymaking. This research should beundertaken first and pay particular attention to detecting whether Regulation II has createdunequal and disproportionate access and inclusion impacts on important stakeholders, such aseconomically disadvantaged or marginalized communities and those serving in or retired fromour military. There are good reasons to believe it has done so—and, as such, proceeding withregulatory actions that would magnify these effects should be avoided.

Any action the Board undertakes should be based on robust data and changes in market realities(i.e., fraud and cyber threat environment, transaction types, and routing in multipleenvironments). Since Regulation II was implemented more than a decade ago, there have beenincreases in fraud and operational costs that are not currently captured in the Federal Reservesurvey.

Download the letter to read the full text.