Global: Federal Reserve Extends Comment Period and Releases Additional Data on Interchange Fee Proposal

The Federal Reserve Board has decided to extend the comment period for its interchange fee proposal, originally slated to conclude on Feb. 12. The new deadline for public comments is now May 12, as announced in a press release on Tuesday (January 23).

The decision to extend the comment period aims to provide the public with more time to analyze the proposal and formulate their responses, according to the release. Additionally, the Board has published supplementary data related to the interchange fee cap to offer more information to the public as they assess the proposal.

This data specifically pertains to the proposed methodology for determining the base component of the interchange fee cap, as mentioned in the release.

These developments follow the Board’s October 2023 request for comments on a proposal to reduce the maximum interchange fee that large debit card issuers can receive for a debit card transaction. The proposal also outlines a process for updating the maximum amount every other year, in accordance with legal requirements.

The release states, “By law, the Board is required to establish standards for assessing whether an interchange fee received by a large debit card issuer for processing a debit card transaction is reasonable and proportional to certain issuer costs.”

This proposal could represent the most significant overhaul of debit card interchange fees in more than a decade, potentially leading to a roughly 30% reduction in fees, as reported by PYMNTS in October.

The notice of proposed rule-making from the Fed highlighted that while issuer costs have decreased over the past few years, interchange fee caps have remained constant.

Fed Vice Chair for Supervision Michael Barr noted during an October Board meeting that “debit cards accounted for over half of all non-cash payments.”

The anticipated reduction in fees has garnered support from retailers, who believe it will benefit both their businesses and consumers. Retailers have long criticized the high “swipe fees” imposed by credit card providers and banks, arguing that they place an undue burden on consumers.

However, it’s essential to acknowledge that interchange fees have played a role in funding the development of infrastructure to combat fraud.