The American Bankers Association (ABA) has warned that proposed rules to reduce debit card fees will hinder financial inclusion efforts.
ABA president and CEO Rob Nichols emphasized the importance of BankOn-certified accounts in reducing the number of unbanked households in the US in a letter to bank CEOs.
He said: “Because BankOn accounts have very low monthly and almost no ancillary fees, these accounts are largely supported through debit card activity — which in itself is an indication that customers are enjoying the benefits of being banked and no longer need to pay high fees for products like money orders or check cashing services.”
The Federal Reserve’s Regulation II (Debit Card Interchange Fees and Routing) proposal establishes new standards to check whether a debit card interchange fee received by an issuer for a transaction is reasonable and proportional to the costs incurred by the issuer.
Nichols said this proposal would result in an almost 30% decrease in the debit interchange fee that banks and credit unions may receive for each debit transaction. The proposals also include the introduction of an automatic biennial review of these fee caps without accompanying public comment each time the caps are reviewed by the Federal Reserve.
He said: “Ultimately, this sustained agenda to weaken the economic viability of debit card products jeopardizes consumers' ability to access safe and affordable banking products.”
Nichols also added that this rule “threatens to undo the good work” BankOn has achieved and called on bank CEOs to “take action to ensure that the Federal Reserve understands that consumers are stakeholders worthy of consideration”.
In a separate letter to the Fed, the Cities for Financial Empowerment (CFE) Fund, which oversees the BankOn initiative, highlighted that its standards for certification allow for interchange fees to ensure that BankOn accounts are sustainable for the banks providing them.
President and CEO Jonathan Mintz said in the letter that interchange fees were “a relevant component of that market sustainability”.