WASHINGTON—NAFCU and CUNA have joined with a group of financial trade associations, including the American Bankers Association, to request the Federal Reserve withdraw its recent proposal to amend Regulation II unless modified.
The Fed issued the proposal to make changes to Regulation II– which covers debit card interchange fees and network routing exclusivity – in May.
"Our position then, as it is now, is that Regulation II represents flawed regulatory policy," wrote the trade organizations in the letter. "However, the regulatory expansion represented by this proposal stands on even weaker legal footing and would further the harmful consequences of the original regulation. Although it is presented as a 'clarification,' the proposal represents a substantive shift in the routing and exclusivity provisions of Regulation II."
The groups argued that the proposal fails to consider the practical and operational implications of the proposed change and that it asserts consumers are ignorant of the protections that they receive when they use payment cards issued by their financial institution. Additionally, the group mentions that Regulation II exclusivity only benefits the nation’s largest retailers, harming small businesses and consumers in the process.
‘Challenging Time’
"We urge the board to withdraw the proposal, which would increase costs on consumers and small issuers during an already challenging time,” concluded the group.
NAFCU and CUNA each sent separate letters to the Fed on the proposed changes.