ABA Dodd-Frank Tracker

Fed Names New Director of Payments Strategy

2017-08-25T09:52:00.000-04:00

The Federal Reserve named Dave Sapenaro as its new payments strategy director. In his role, Sapenaro will be responsible for overseeing the Fed's efforts to improve the U.S. payments system, including its faster payments initiative. Sapenaro has been with the Federal Reserve for 32 years, serving most recently as first vice president and chief operating at the Federal Reserve Bank of St. Louis.

Read more.

Justice Department Formally Ends ‘Operation Choke Point’

2017-08-18T10:00:00.000-04:00

In a letter to House Judiciary Committee Chairman Bob Goodlatte (R-Va.), a Department of Justice official formally confirmed that the agency has ended the controversial Operation Choke Point initiative, which under the Obama administration sought to curtail legal but politically disfavored businesses by working through bank regulators to pressure financial institutions to end customer relationships with those businesses. Assistant Attorney General Stephen Boyd expanded on DOJ's change.

All of the Department’s bank investigations conducted as part of Operation Choke Point are now over, the initiative is no longer in effect, and it will not be undertaken again. The Department will not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities.

ABA has long opposed Choke Point, successfully urging the FDIC to end its participation in the initiative and supporting legislation to prevent similar activities in the future. However, many financial institutions had been concerned about serving Choke Point-targeted businesses without a clear statement from DOJ that the initiative has been dropped.

Read the letter.

ABA Supports Changes to CFPB's Prepaid Card Rule

2017-08-16T10:22:00.001-04:00

ABA provided feedback on the CFPB’s proposed changes to its final rule on prepaid products. The proposal includes several revisions to error resolution requirements and limited liability provisions of the prepaid rule, which is set to take effect on April 1, 2018.

ABA generally supported the changes and recommended that the CFPB delete certain cards from its definition of “prepaid accounts,” such as jury duty cards that have no fees, cannot be registered and are not marketed to the general public. ABA also recommended that the bureau delete certain language that would require credit card companies to treat prepaid accounts offered by a related company as credit cards for purposes of merchant disputes and error resolution. Finally, the association noted that the April 2018 compliance deadline may no longer be sufficient, and urged the bureau to extend the deadline to Oct. 1, 2018.

Read the letter.

Agencies Clarify Capital Treatment of Centrally Cleared Derivatives Contracts

2017-08-15T09:29:00.000-04:00

The federal regulatory agencies issued joint guidance on the regulatory capital treatment of certain centrally cleared derivative contracts in light of recent changes to the rulebooks of certain central counterparties. The guidance specifically addresses the regulatory capital treatment of variation margin requirements for such centrally cleared derivative contracts and will result in more beneficial regulatory capital treatment for centrally cleared derivative contracts.

Previously, variation margin transferred to cover the exposure that arises from marking such centrally cleared derivatives contracts to market price was considered collateral pledged by one party to the other, with title to the collateral remaining with the posting party. However, under the central counterparties’ revised rulebooks, such variation margin for centrally cleared derivative contracts is considered a settlement payment for the exposure, with title to the payment transferring to the receiving party.

Under the guidance, if banks, after conducting accounting and legal analysis, determine that variation margin payments may be considered settlement of outstanding exposure under the regulatory capital rules, and that the payer of the variation margin has relinquished all legal claims to the variation margin, then variation margin would no longer be considered collateral pledged by one party to the other. ABA has long advocated for more risk-based bank regulatory capital treatment for centrally cleared derivative contracts.

Read the guidance.

This Week Ahead: August 14-18

2017-08-11T11:00:00.000-04:00

Monday

Comments Due CFPB: Amendments to Rules Concerning Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z)
Read more.
Comments Due CFTC: Real-Time Public Reporting and Block Trade
Read more.
Comments Due DOE: Request for Title IV Reimbursement or Heightened Cash Monitoring 2 (HCM2) (PRA)
Read more.
Comments Due FEMA: Evaluation of Existing Regulations, Policies, and Information Collections
Read more.
Comments Due IRS: Centralized Partnership Audit Regime
Read more.
Comments Due TREAS: Financial Crimes Enforcement Network Proposed Collection; Update and Renewal of the Bank Secrecy Act Designation of Exempt Person Report (PRA)
Read more.

Wednesday

Comments Due FCA: Statement on Regulatory Burden
Read more.

Friday

Effective Date SBA: Small Business Investment Companies: Passive Business Expansion and Technical Clarifications
Read more.

All times in Eastern Standard Time. See future events on the Dodd-Frank Calendar.

Fed Issues Final Guidelines for Evaluating Joint Federal Reserve Account Requests

2017-08-10T09:45:00.000-04:00

The Federal Reserve issued its framework for how it will evaluate applications for joint accounts at Federal Reserve banks. Joint accounts can be used to facilitate faster settlement for payment transactions among the joint account holders.

Under the guidelines, joint account applicants must be depository institutions eligible to open individual accounts at Federal Reserve banks. Applicants must designate one “agent” for the account, indemnify the Fed for losses related to operating the account and rely on the payment system operator or agent to provide clearing services and manage positions within the joint account. The Fed will evaluate all applications it receives based on six specific criteria.

ABA generally supports the Fed’s guidelines as the industry continues to work toward the goal of a faster, more efficient payments system. In previous comments, ABA emphasized the need to maintain the safety and integrity of the payments system by limiting access to joint accounts to those that are already eligible to open individual accounts with the Fed. “Put simply, banks are held to higher standards in order to protect the interests of their customers,” ABA said. “Any entity that is not subject to the same standards and oversight would present unacceptable risk as a payments system participant.”

Read the final guidelines.
Read ABA's comment letter.

This Week Ahead: June 17-21

2017-07-14T11:47:00.002-04:00

Monday

Comments Due FDIC: Affiliate Marketing Consumer Opt-Out Notices
Read more.
Comments Due FDIC: Agency Information Collection Activities: Proposed Collection Renewals (PRA)
Read more.
Comments Due FDIC: Retail Foreign Exchange Transactions
Read more.

Tuesday

Comments Due HUD: 60-Day Notice of Proposed Information Collection: Mortgagee's Application for Partial Settlement (PRA)
Read more.

Thursday

Effective Date CFTC: Revisions to Freedom of Information Act Regulations
Read more.

Friday

Comments Due EBSA: Proposed Extension of Information Collection Requests Submitted for Public Comment (PRA)
Read more
Comments Due FRB: Ongoing Intermittent Survey of Households
Read more
Comments Due FRB: Proposed Agency Information Collection Activities (PRA)
Read more

All times in Eastern Standard Time. See future events on the Dodd-Frank Calendar.

ABA: CARD Act Has Led to Higher Credit Costs, Lower Availability

2017-06-09T10:48:00.000-04:00

ABA filed comments in response to the CFPB’s request for information regarding the consumer credit card market, pursuant to the Credit Card Accountability Responsibility and Disclosure Act of 2009. The CARD Act requires the bureau to conduct a review every two years of the consumer credit card market, including a review of the terms of credit card agreements and practices and the effects of the CARD Act on the cost and availability of credit, particularly with respect to non-prime borrowers.

ABA noted that while the CARD Act has provided some consumer benefits, there have been tradeoffs – most notably the increase in the cost of credit and reduction in the availability of credit. For example, prime and subprime credit lines fell from 26% in 2008 to 20% in 2016, ABA said, and new prime and subprime accounts were down 17% and 22%, respectively, during that timeframe. The association also noted that the CARD Act’s “ability to pay” provision has caused some qualified borrowers to be denied credit, disproportionately affecting low- and moderate-income borrowers.

ABA also provided feedback to the bureau on several other topics, including credit card rewards programs, variable interest rates, secured credit cards, online and mobile account servicing, innovation in the credit card market, third party comparison sites and debt collection. The association also offered comments on deferred interest products, pointing out that these programs are both popular and beneficial to customers.

Read the letter.

CFPB Urges Card Issuers to Seek Alternatives to Deferred Interest Promotions

2017-06-09T09:58:00.000-04:00

CFPB Director Richard Cordray recently sent letters to top retail credit card companies expressing concerns about deferred interest products, which allow consumers to pay for a purchase over time interest-free, provided the balance is repaid within the promotional period.

Expanding upon the contents of the letter, Cordray in remarks noted that the bureau is encouraging companies to consider offering zero-percent-interest promotions in the place of deferred interest promotions.

ABA has consistently worked to provide CFPB with data on the value and use of deferred interest products in the marketplace, noting that they provide an alternative to riskier products. In its comment letter to CFPB regarding the 2017 CARD Act Report, the association cited a 2015 review by the bureau that found that even among subprime consumers, the majority repay within the deferred interest period and benefit from the free loan.

Furthermore, consumers that do not repay within their deferred interest period pay the same amount of interest as those using credit cards and paying interest from the start of the loan. “In other words, they were no worse off than if they had not had the interest-free option,” ABA added.

Read more.

House Leaders Expected to Pull Durbin Repeal from Choice Act

2017-05-25T09:27:00.000-04:00

House Republican leadership is expected to remove a provision repealing the Durbin Amendment from House Financial Services Committtee Chairman Jeb Hensarling's Financial Choice Act before it receives a vote on the House floor, according to news reports.The decision came after a number of Republicans had expressed concerns about including the Durbin repeal in the financial reform bill.

ABA President and CEO Rob Nichols thanked the thousands of bankers and state associations who have contacted their representatives in recent days to urge support for the Durbin repeal. He added that the debate on Durbin's price caps on debit interchange fees is not over.

We will continue to let members of Congress know that a vote to keep the Durbin Amendment on the books is a vote for government price controls and against consumers. Until it’s repealed, big box retailers will continue to reap the billions in profits they promised to pass along to their customers. That’s wrong and Congress should fix it.

Financial Choice Act Clears House Committee

2017-05-05T11:30:00.000-04:00

The House Financial Services Committee has voted to advance the Financial Choice Act, Chairman Jeb Hensarling’s (R-Texas) sweeping, 600-page bill aimed at reforming parts of the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief for banks. ABA President and CEO Rob Nichols saluted the committee for its “very important step toward reforming the Dodd-Frank Act and providing much-needed regulatory relief,” adding that “we look forward to working with lawmakers from both parties as this important process moves forward.”

The Choice Act, which passed on a party-line vote, includes a number of regulatory relief provisions long sought by ABA as part of its Blueprint for Growth, including a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model and repeal of the Durbin Amendment, which capped prices on debit interchange, as well as the Volcker Rule.

The bill would also reform the CFPB, renaming it the Consumer Law Enforcement Agency and stripping it of examination powers and “UDAAP” enforcement authority and replace Dodd-Frank’s Orderly Liquidation Authority provision with a new Bankruptcy Code. In addition, it would also allow banks maintaining a 10 percent non-risk weighted leverage ratio to elect into an alternative regulatory regime that would, among other things, exempt qualifying institutions from federal capital and liquidity requirements, blocks on capital distributions, systemic risk regulations and limitations on mergers and acquisitions provided that any new entity also maintains the minimum leverage ratio.

Nichols said:

The thousands of pages of new regulations facing banks have become a tremendous driver of decisions to sell or merge. Given the cost of complying with all the new rules, some community banks are having to choose between meeting those regulatory requirements and meeting the financial needs of their individual and business customers.

Read Nichols' statement.

ABA Commends Congressional Effort to Reform Dodd-Frank

2017-05-02T10:40:00.000-04:00

As the House Financial Services Committee prepares to begin the markup of the Financial Choice Act, ABA President and CEO Rob Nichols wrote to committee leadership commending them for their efforts to address the negative consequences of the Dodd-Frank Act.

Nichols highlighted several ABA-advocated provisions in the bill. These include: the TAILOR Act, which requires regulators to tailor regulations based on a bank’s business model and risk profile; a Qualified Mortgage safe harbor for mortgages held in portfolio; the establishment of an independent office for examination review; a provision to raise the Federal Reserve’s small bank holding company threshold to $5 billion in consolidated assets; a measure providing greater flexibility for mutual banks; a repeal of the small business loan data collection requirement; and a short form call report for highly rated banks. The bill also includes a provision that would repeal the Durbin Amendment, as ABA strongly supports.

In addition, Nichols commended the committee for its efforts to rein in the CFPB’s broad authority, and advocated for a bipartisan commission structure to provide greater accountability. He also urged the committee to take additional steps to provide regulatory relief from unnecessary stress tests.

Finally, he expressed reservations about the Choice Act’s voluntary “off-ramp” from Dodd-Frank’s regulatory regime for banks that elect to maintain a specified level of capital. While acknowledging that the provision was well-intentioned, he pointed out that hundreds of well-run banks may choose not to pursue the exemption or be unable to do so, which would prevent them from achieving meaningful regulatory relief.

Read more.

Joint Trades Op-Ed: Durbin Amendment Harms Community Banks, Small Business

2017-05-02T10:00:00.000-04:00

In a joint op-ed published in Morning Consult, the heads of several major financial trade associations, including ABA, called for the repeal of the Durbin amendment, which imposed government price controls on debit card interchange. The op-ed came ahead of today’s markup of the Financial Choice Act, which includes a provision to repeal the controversial amendment.

According to data from the Federal Reserve Bank of Richmond, the Durbin amendment has “siphoned upwards of $6 billion to $8 billion a year from the revenue banks and credit unions use to serve their customers and members, respectively,” the groups wrote, totaling $42 billion since it was passed as part of the Dodd-Frank Act in 2010. They pointed out that the amendment has greatly limited banks’ and credit unions’ ability to provide their customers with low-cost financial products and services, and that in the meantime, retailers’ profits have grown.

In addition, they noted that the amendment has done significant harm to small businesses, which have seen increased costs for processing small-dollar transactions and fewer choices for payment processing services since the law took effect. Smaller card issuers have also struggled with added compliance costs and lower revenues as a result of the amendment.

Read the op-ed.

Hensarling Releases Full Text of Financial Reform Bill

2017-04-20T10:30:00.000-04:00

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has released the latest legislative text of his Financial Choice Act, a 600-page bill aimed at rolling back and reforming parts of the Dodd-Frank Act’s extensive supervisory regime, as well as providing regulatory relief for banks of all sizes. A similar version of the legislation cleared the committee in the previous Congress. The committee is scheduled to hold a hearing on the bill next week.

Title V of the Choice Act contains numerous provisions long sought by ABA. These regulatory relief measures would provide a Qualified Mortgage safe harbor to mortgage loans held in portfolio, tailor supervision to banks’ risk profiles and business models, raise the small bank holding company policy statement asset threshold to $5 billion, create an independent exam appeals process, provide charter flexibility for thrifts, stop data collection on small business loans, clarify the QM rule’s points and fees test, expand the short-form Call Report, enhance mortgage relief for smaller banks and smaller mortgage originators and prevent future “Operation Choke Point” activities.

The bill further details plans to reform the CFPB, which would be renamed the Consumer Law Enforcement Agency and would be stripped of examination powers and “UDAAP” enforcement authority. The Choice Act would also repeal the Durbin Amendment, impose more stringent penalties for Wall Street in cases of fraud or deception and repeal sections of Dodd-Frank that limit capital formation, including the Volcker Rule. It would bring the new CLEA, FDIC, OCC, Federal Housing Finance Agency, National Credit Union Administration and supervisory functions of the Federal Reserve into the congressional appropriations process, mandate cost-benefit analyses of regulations and require congressional approval for “major rules.”

Additional regulatory relief would be available for banks maintaining a 10% non-risk weighted leverage ratio that elect into the alternative regime. Qualifying banks would be exempt from federal capital and liquidity requirements, blocks on capital distributions, systemic risk regulations and limitations on mergers and acquisitions provided any new entity also maintains the minimum leverage ratio.

Another key component of the Choice Act is ensuring no institution is “too big to fail” by replacing Dodd-Frank’s Orderly Liquidation Authority provision with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution. Additionally, it significantly restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors.

View the full text of the bill.

Hundreds of Bankers to Congress: Repeal Durbin

2017-03-17T09:37:00.001-04:00

In a joint letter to House leadership, ABA, along nearly 850 banks and state associations, urged Congress to include a repeal of the Durbin Amendment in financial reform legislation this year. A repeal would eliminate government-imposed price controls on debit card interchange. The groups pointed out that the Durbin Amendment – an eleventh hour insertion into the Dodd-Frank legislation – has failed to deliver on its promise of lower costs for consumers at the cash register.

The letter said:

Six years later, there is no evidence that retailers lowered prices as they promised – the Durbin Amendment was simply a windfall for the nation’s largest merchants. And the price for that windfall is being paid by consumers, many of whom can no longer enjoy free checking accounts, free debit rewards, and other add-on benefits that used to be offered by their bank. Rather than helping consumers, the Durbin Amendment has shifted higher profits to big-box stores and away from small businesses and consumers.

Read the letter.

Op-Ed: Nichols Calls for Repeal of ‘Archaic’ Durbin Amendment

2016-06-28T09:44:00.000-04:00

In an op-ed in The Hill, ABA President and CEO Rob Nichols called for the repeal of the Dodd-Frank Act’s Durbin Amendment, which he said has negatively affected banks’ ability to serve their customers and failed to deliver its promise of lower prices for consumers. The amendment created a government-imposed cap on debit interchange fees charged by banks with $10 billion or more in assets, though Nichols noted that smaller institutions have also suffered Durbin’s unintended consequences.

Prior to the Durbin amendment, pricing on debit card interchange was tied to the market, which allowed banks to support consumer benefits such as low-cost checking accounts and debit rewards programs. Once Durbin’s one-size-fits-all rate cap was instituted, however, Nichols said that unintended consequences came in the form of less flexibility for small businesses and higher compliance costs for banks – with consumers faring poorly.   

Nichols wrote:

Once the interchange funding… was diverted to retailers, consumers noticed new minimum balance requirements, higher fees and fewer rewards programs. The Durbin Amendment has made it harder to obtain low-cost mainstream banking services, especially the protections of a debit card-linked checking account. Retailers had promised to offset these consequences by passing their savings onto consumers through lower prices -- which has not happened.  

Echoing a letter from the state bankers associations last week, Nichols called on Congress to support H.R. 5465, a bill recently introduced by Rep. Randy Neugebauer (R-Texas) that would repeal the amendment.

Read the op-ed.

State Associations Support Durbin Repeal Legislation

2016-06-27T10:00:00.000-04:00

The state bankers associations wrote to Rep. Randy Neugebauer (R-Texas) to express their support for a bill he introduced earlier this month that would repeal Dodd-Frank’s Durbin Amendment and eliminate the government-imposed price caps on debit card interchange. The groups pointed out that the amendment has reduced banks’ ability to offer affordable products and services to their customers, while failing to pass on any tangible savings to consumers, as originally intended.

The associations wrote:

[T]he amendment has only rewarded big-box stores with higher profits, while resulting in higher costs to smaller merchants, fewer resources available for banks -- including community banks -- to serve their communities, and a reduction in low-cost banking services for those most in need. [R]etailers cannot produce evidence that they have returned the proceeds of the Durbin Amendment to consumers in the form of lower prices. Fewer services and higher costs for consumers is not an acceptable policy outcome for a law that promised tangible benefits for American debit card customers.

Read the letter.

ABA, Trades Support Durbin Repeal

2016-06-20T11:00:00.000-04:00

ABA and several other trade groups wrote to House leaders last week in support of H.R. 5496, introduced by Rep. Randy Neugebauer (R-Texas) to repeal the interchange fee price controls imposed by the Durbin amendment.

The groups said,

The Durbin amendment was included as a last-minute addition to the Dodd-Frank Wall Street Reform Act with the intent that retailers would pass along an estimated $8 billion in savings per year to debit customers in the form of lower prices. Retailers promised they would pass any savings from the Durbin amendment on to their customers, but almost six years since the amendment was passed, it is clear customers have seen no relief at the register.

Read the letter.

House Bill Introduced to Repeal Durbin Amendment

2016-06-15T10:15:00.000-04:00

Rep. Randy Neugebauer (R-Texas) has introduced H.R. 5465, a bill that would repeal Dodd-Frank’s Durbin Amendment, which institutes a cap on debit interchange fees charged by institutions with $10 billion or more in assets. Neugebauer noted that as a result of the Durbin Amendment, some banks reduced their free checking account offerings, increased account fees and instituted higher minimum balance requirements.

Neugebauer said:

What the Durbin Amendment did… was artificially shift over $30 billion in revenue from one industry to another. Instead of promoting free market principals and technological advancement, such as enhanced data security capabilities, the Durbin Amendment was nothing more than a government action to manipulate the marketplace. This legislation will restore competition in the marketplace, remove arbitrary government price caps, and ensure consumers have affordable access to basic banking services.

ABA expressed strong support for the bill. ABA President and CEO Rob Nichols said:

When the government picks winners and losers in the marketplace, consumers lose. The Durbin Amendment has distorted the market to the detriment of small businesses, consumers and banks of all sizes. Retailers would rightfully oppose laws setting the price of milk or paintbrushes in their stores. After a half decade of trial and failure, we hope Congress will allow this divisive and outdated retailer giveaway to fade into the rearview mirror.

Read ABA's statement.

Keating Op-Ed: Debit Interchange Cap ‘Distorts the Marketplace’

2015-09-21T09:32:00.000-04:00

The Durbin Amendment’s cap on debit card interchange fees is distorting the retail marketplace and harming consumers, ABA President and CEO Frank Keating said in an American Banker op-ed responding to claims by retailers that the Federal Reserve set the fee cap too high.

Keating cited new research from the Federal Reserve Bank of Richmond that showed that of the retailers who have seen their interchange fees drop, “few reduced the prices of their products and passed the savings on to consumers.” Meanwhile, many banks had to drop or curtail free checking because of lost interchange revenues, creating a double loss for consumers.

“The fact is that price controls come with unintended consequences that arbitrarily create winners and losers in the marketplace,” Keating wrote, noting that the Richmond Fed study found that interchange costs went down for sellers of big-ticket items but increased for merchants that process small-dollar transactions. “That’s a direct — and unintended — consequence of the government’s attempts to micromanage marketplace pricing,” he explained. “Market forces react to such arbitrary price controls in unforeseen ways.”

Read the op-ed.

Supreme Court Lets Interchange Decision Stand

2015-01-21T10:39:00.000-05:00

The Supreme Court declined to hear a challenge by the retail industry to the Federal Reserve Board’s debit interchange fee cap rule. The court’s decision leaves in place a D.C. Circuit Court of Appeals ruling from March 2014 upholding the Fed’s rule. The appellate court had reversed a 2013 lower court decision that would have required even lower debit interchange fee caps than the Fed’s rule calls for. ABA President and CEO Frank Keating said:

The Supreme Court has reached the right result, but we shouldn’t lose sight of the fact that the underlying policy — the Durbin Amendment — has not accomplished its goal of lowering prices for consumers. The Durbin Amendment has significantly harmed consumers and financial institutions. At the end of the day, American consumers have paid the price for the efforts of big-box retailers to line their pockets at their own customers’ expense.

In the 2013 decision, a federal district judge said the Fed violated congressional intent in the Dodd-Frank Act by setting the interchange fee cap too high and failing to allow merchants to choose multiple unaffiliated PIN and signature networks for each card transaction they process.

ABA & Financial Groups Rebut Misleading Claims by Retailers

2014-11-13T08:22:00.001-05:00

BA and several other financial trade groups wrote to Congress to rebut “inaccurate and misleading” arguments from retailers for a uniform federal law governing data breach notification. ABA and the other financial groups said that a notification standard, though, is not enough.

Financial institutions have developed and maintain robust internal protections to combat criminal attacks and are required by federal law and regulation to protect this information and notify consumers when a breach occurs that will put them at risk. In contrast, retailers are not covered by any federal laws or regulations that require them to protect the data and notify consumers when it is breached.

The letter described to congressional leaders the strong data security structure employed by financial institutions, noting that retailers do not have similar internal safeguards or external oversight. “It is only when coupled with the development of strong internal data protection standards and robust oversight that the retail community will find itself in a better position to protect consumers and their confidential personal financial information from criminal abuse,” the groups wrote.

Read the letter.

Fed Publishes Interchange Report

2014-09-18T16:00:00.000-04:00

The Federal Reserve Board published a report on the volume and value, interchange fee revenue, certain issuer costs and fraud losses related to debit card transactions in 2013. The report is the third in a series to be published every two years pursuant to section 920 of the Electronic Fund Transfer Act (EFTA).

In 2013, covered issuers' costs of authorizing, clearing, and settling (ACS) debit card transactions, excluding issuer fraud losses, varied greatly across respondents, with the median issuer having an average ACS cost of 14.9 cents and the issuer at the 75th percentile having an average ACS cost of 42.2 cents.

Issuers with the highest debit card transaction volume generally had the lowest ACS costs per transaction as reflected in an overall average of 4.4 cents per transaction, down from 5 cents per transaction in 2011. Conversely, issuers with the smallest debit card programs generally had the highest ACS costs per transaction.

The estimated debit-card fraud losses to all parties was $1.57 billion in 2013, with an average loss of approximately 8 basis points as a share of transaction value, up slightly from 2011.

Read more.

Retailers Appeal Interchange Decision to Supreme Court

2014-08-19T09:10:00.001-04:00

The plaintiffs in a legal challenge to the Federal Reserve Board’s interchange fee cap rule appealed to the Supreme Court. They sought to overturn a D.C. Circuit Court of Appeals ruling in March, which in turn reversed a lower court decision that would have required even lower debit interchange fee caps than the Fed’s rule calls for.

Last summer, a federal district judge said the Fed violated congressional intent in the Dodd-Frank Act by setting the interchange fee cap too high and failing to allow merchants to choose multiple unaffiliated PIN and signature networks for each card transaction they process. ABA strongly disagreed with the decision and filed an amicus brief in the successful appeal.

Fed Report to Congress on Gov’t Prepaid Cards

2014-07-23T12:50:00.001-04:00

The Dodd-Frank Act requires the Federal Reserve Board to report annually to the Congress on the prevalence of use of general-use prepaid cards in federal, state, and local government-administered payment programs and on the interchange fees and cardholder fees charged with respect to the use of such prepaid cards.

Across reported programs that provided a prepaid card option, government offices disbursed almost $1.1 trillion in 2013, 14% of which was disbursed through prepaid cards—a small increase in comparison to 2012 and 2013 data.

Issuers collected more than $502 million in fee revenue during 2013 across reported programs, with 65% from interchange fees and 35% from cardholder fees. Although the prepaid cards provided under government-administered programs usually offer cardholders one or more free ATM cash withdrawals per month, ATM withdrawal fees constitute 58% of all card- holder fee revenue that issuers collected in 2013. Customer service and account servicing fees constitute the next largest source of cardholder fee revenue, at 15% and 14%, respectively.

Read the report.