The Federal Reserve was not “legally required” to resume debit card interchange caps and must not have actually done so, previous Fed Vice Chairman for Supervision Randal Quarles just recently informed IntraFi’s Banking with Interest podcast. The Fed in October proposed to substantially decrease the cap on debit card interchange charges made by banks and set up a brand-new evaluation procedure by which the cap would be modified every 2 years without public remark.
“I don’t think that the Fed was legally required” to even more decrease charges, stated Quarles, who was vice chairman from 2017 to 2021. “Under the Durbin Amendment, there are a variety of very clear interpretive practices that would have said, ‘We’ve done what we needed to do. We don’t need to go further in ratcheting the fees down.’ And I think the Fed should have taken that path having recognized that there is no government interest in the outcome.”
Current Fed Vice Chairman for Supervision Michael Barr has actually asserted that the Fed is needed to keep debit card charges “reasonable and proportional,” while the American Bankers Association and other monetary services associations think that the Fed released all its tasks under the Durbin Amendment by composing a 2011 guideline (Regulation II) which subsequent rulemakings are discretionary.
Asked about the proposition, Quarles stated the intent behind the development of the cap in the Durbin Amendment may have been reasonable at the time of the Dodd-Frank Act, however the proof ever since reveals that Durbin has actually not assisted customers. “We now have a lot of experience with the Durbin Amendment and its implementation, which has definitively shown that this is simply transferring surplus from the banks to the retailers,” he stated.