Many consumer groups, the National Retail Federation in particular, have been very vocal in their praise of the Federal Reserve’s proposed new caps on interchange fees back in December. Yet this week, according to Reuters, the Consumer Federation of America came down on the side of the card networks and banks against the Fed’s debit plan. Well, at least to an extent.
Reuters reported that Legislative Director Travis Plunkett in a letter filed Tuesday stated the federation “strongly endorses the intent of the statute” bringing greater oversight to debit interchange fees. Yet Plunkett also urged regulators to reassess the new caps, citing that banks may attempt to recover lost profit by tacking on charges for checking accounts and other services. He added that low-income households consequently may longer be able to pay for traditional banking.
“’We recommend that the Federal Reserve consider broadening its pricing standard to include compensation for additional, legitimate incremental expenses,’ Plunkett said in the letter, adding that such additional expenses could include costs for fraud prevention and for fixing billing errors,” reported Reuters.
The Consumer Federation also asked regulators to “pay close attention” to how the proposal would affect small banks and credit unions. During last week’s House Financial Services Committee hearing on the Fed’s debit proposal, Reuters reports that Fed Chairman Ben Bernanke and Federal Deposit Insurance Corp Chairman Sheila Bair testified that the plan could have unintended consequences for smaller financial institutions. The proposal will be finalized in April and required to be implemented by July, according to Reuters.
Click here to read the full letter from the Consumer Federation of America.
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