Today, Congressman Blaine Luetkemeyer (MO-3) introduced the Secure Payments Act of 2024 directing the Federal Reserve Board of Governors to perform a thorough economic analysis of its proposed changes to Regulation II before finalizing the rule. Specifically, the analysis must measure the impact on consumers, including access to affordable debit accounts, and a review of the primary beneficiary of the interchange cap.

“Since its adoption, Reg II has proven to be a failure for everyday people. Studies from the GAO and the Federal Reserve itself show that the policy has significantly decreased access to free checking accounts for low-income families and increased the cost of banking services,” said Luetkemeyer. “Meanwhile the biggest beneficiaries of Reg II – the world’s largest retailers – boasted on their shareholder earnings calls the profits the regulation added to their balance sheets.”  

Background: Regulation II was established by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and imposed by the Federal Reserve. The regulation placed arbitrary caps on the price retailers pay for debit card services. In February of 2022, the Government Accountability Office found that the regulation increased costs of checking accounts and drastically decreased access to free checking.

In October 2023, despite the well-documented harm to consumers, the Federal Reserve issued a proposal to further lower debit card interchange caps.

Full bill text can be found HERE.

Rob Nichols, American Bankers Association President and CEO: “The Fed’s proposal to slash debit interchange fees under Regulation II is part of a tsunami of new federal regulations that would have severe consequences for banks, their customers and their communities. This rule would undermine successful financial inclusion efforts by raising the cost of checking and other basic banking services and jeopardizing the low-cost Bank On accounts that have brought millions of Americans into the banking system. Rep. Luetkemeyer’s Secure Payments Act would help prevent these harms by requiring the Fed to stop and fully examine the impact of this proposal, as well as the cumulative impact of other new proposals, on banks and underserved consumers.

Lindsey Johnson, Consumer Bankers Association President and CEO: “Regulators should understand the impact of the regulations they introduce on consumers before they’re finalized. We applaud Rep. Blaine Luetkemeyer for introducing the “Secure Payments Act,” which would do just that for the Federal Reserve’s proposal to dramatically reduce debit interchange revenues under Regulation II. After the implementation of the original Reg II rule, banks—both large and small—lost an important revenue that is vital to their ability to serve all ends of the consumer market, and as a result free checking accounts were reduced by nearly one third. CBA research has shown that this new proposed regulation could further reduce availability of free checking and increase costs of banking services by as much as $2 billion a year. Rep. Blaine Luetkemeyer’s important legislation would ensure our regulators understand the consumer harm this proposal would have before it’s too late”.

Independent Community Bankers of America: “The Federal Reserve’s debit card proposal doesn’t use full and complete data from community banks, ignores its potential impact on fraud controls, and could jeopardize access to low-cost and no-cost banking services in the local communities that community banks serve,” Independent Community Bankers of America President and CEO Rebeca Romero Rainey said.  ICBA and the nation’s community banks strongly support Rep. Luetkemeyer’s Secure Payments Act of 2024 to require the Fed to study the impact of its proposal on consumers, community banks, and access to deposit accounts”.

Greg Baer CEO of the Bank Policy Institute: “We strongly support this legislation. The Fed’s proposal to reduce interchange fees would lead to a reduction in low-cost deposit accounts, which would directly harm LMI and underserved consumers.  Regulators should scrutinize a proposal with such broad implications to avoid unintended consequences, and this legislation rightfully will force regulators to take the time to demonstrate that the changes are justified, and the tradeoffs well understood”.

Jim Nussle, America’s Credit Unions President and CEO: “Credit unions need access to as many resources as possible to provide critical services in rural and underserved communities across America, and we've already seen that debit interchange restrictions limit those resources and ultimately hurt consumers. The Federal Reserve's proposal to reform all three components of the Regulation II interchange fee cap deserves a study to fully understand its potential consequences. Congressman Luetkemeyer has been a fierce partner in this fight, and we thank him for introducing a commonsense piece of legislation that will bring real time data and evidence to the Federal Reserve's effort. America’s Credit Unions looks forward to supporting policies that allow people to live their best financial lives”.

Jackson Hataway, Ph.D., Missouri Bankers Association President and CEO: “We want to applaud Rep. Luetkemeyer for introducing the Secure Payments Act, a bill that would prevent the Federal Reserve from moving too quickly and taking damaging missteps as it considers further limitations to debit interchange rates. The Fed's proposal would have a dramatic impact on the availability of no or low-cost debit and checking products and would disproportionately burden the lowest income consumers. It is our hope that Congress will support Rep. Luetkemeyer and require the Fed to undertake a much more data-driven, comprehensive and thoughtful approach to a proposal that will impact millions of Americans”.