Federal Reserve Must do More to Rein in Excessive Fees

Urge to consider tiered approach to debit interchange cap

The Retail Industry Leaders Association (RILA) filed comments with the Federal Reserve over the weekend explaining our support for the Board’s proposal to reduce the base debit interchange from $0.21 to $0.144. 

“For more than a decade, retailers and consumers have been footing the bill for debit interchange rates far higher than what the law requires. The data overwhelmingly proves the current rate needs to be lowered to more accurately reflect the reasonable and proportional costs actually incurred by issuing banks,” said Austen Jensen, RILA executive vice president, government affairs. “Leading retailers want to see this rule finalized as soon as possible. It is essential that the overall threshold be reduced to a level that reflects congressional intent and the true cost in the market.” 

RILA’s comments also urge the Board to consider adopting a tiered approach that creates at least two rates: one for the largest banks with the lowest processing costs, and one for all other smaller banks.   

“The proposed reduction is a first step in the right direction.  And a tiered approach would better align the debit interchange system with Congress’s stated goals and the law,” Jensen said. “Adopting this new tiered approach would better balance the cost recovery regime between the largest banks with the lowest cost, while maintaining equitable treatment for smaller issuing banks in the debit market.” 

Leading retailers argue that the current proposal still unnecessarily drains money from retailers and consumers.

“RILA implores the Board to strengthen the current proposal to ensure the largest banks aren’t circumventing the law and still collecting excess profits,” said Jensen.  

RILA supports the biannual review process, but the Federal Reserve should ensure the data is reliable, accurate and reflects the true market conditions. 

“RILA endorses the appropriate steps to improve the reliability and transparency of the biennial survey data, and urges the Board to adopt a process where unexpected, short-term increases in the costs reported unilaterally by regulated financial institutions do not lead to automatic increases in the debit interchange fee cap absent an opportunity for merchants and other stakeholders to weigh in,” said Jensen. 

RILA’s recommendations and full comment letter are available here.  

RILA is the US trade association for leading retailers. We convene decision-makers, advocate for the industry, and promote operational excellence and innovation. Our aim is to elevate a dynamic industry by transforming the environment in which retailers operate.

RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $2.7 trillion in annual sales, millions of American jobs, and hundreds of thousands of stores, manufacturing facilities, and distribution centers domestically and abroad.

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