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Rep. Spencer Bachus (R-AL), new chair of the House Financial Services Committee, has announced several upcoming hearings for February. He has scheduled a hearing on the Federal Reserve's proposed rule for debit card interchange on Thursday, February 17. At this writing, specific panelists have not been named, but many expect representatives from the Federal Reserve to appear in order to explain the proposed rule.
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| Rep. Shelley Caputo will chair hearing |
The Federal Reserve issued its draft rules on December 16, 2010. The major headline was the proposed cap of 12 cents per transaction for debit card interchange. This cap represents a near 80 percent reduction in current debit card interchange rates. Comments to the proposed rule to Federal Reserve are due February 22. By law, the Federal Reserve must finalize the rule by April 22.
Small issuers universally decried the proposed cap even though the law exempts any financial institution lower than 10 billion in assets from the cap. These issuers are concerned merchants will steer consumers to debit cards with the lowest interchange rate.
After the December 16 release of the proposed rule, news reports began to appear detailing how large and small financial institutions plan to address this significant loss of interchange revenue. The Wall Street Journal ran an article on January 5 titled, "At Banks, New Fees Replacing Old Levies." Many other articles detailed how free checking accounts may soon go away for many consumers.
No doubt many in Congress are the hearing the chorus that having the government set debit card interchange may not benefit consumers in the end. The February 17 hearing in the House Financial Services Committee should be the first step in building that record.
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