BPI, CBA and TCH Respond to Fed Announcement on Reg II

Washington, D.C. — The Bank Policy Institute, Consumer Bankers Association and The Clearing House issued the following statement in response to the Federal Reserve’s proposed changes to Regulation II, which establishes caps on what banks can charge for facilitating debit card transactions.

The last time the Federal Reserve placed a cap on debit transaction costs, two things happened: the availability of free checking accounts declined and merchants pocketed the difference in cost, defaulting on their promise to the American consumer to lower costs at the counter. Attempting to revisit the failed policy in a world where technology and fraud prevention costs are even higher will exacerbate these problems and further harm consumers.

The Truth is, Since Regulation II Became Effective in 2011:

  • Merchants didn’t lower prices.
    • According to a merchant survey conducted by the Federal Reserve Bank of Richmond and Javelin Strategy & Research in 2014, 75% of merchants reported that they did not change prices due to Regulation II, 23% reported that they increased prices and 2% reported that they decreased prices.
  • Account holders have experienced higher checking account fees and lower availability of free accounts.
    • Nearly 60% of regulated banks offered free checking account options prior to Regulation II’s effectiveness; that percentage dropped to less than 20% within the first few years after Regulation II became effective.
    • Higher bank fees attributable to Regulation II priced some consumers out of the market and resulted in their use of more expensive banking replacements such as check-cashing and payday-lending facilities.
  • Bank investments in technology and fraud prevention have risen.
    • Interchange goes toward fraud prevention; insufficient updates to this calculation could hinder efforts to combat fraud. These sophisticated efforts by large issuers make the overall system safer by eradicating fraudulent activity that could harm other issuers and consumers.
    • Evaluating the same cost metrics as the Board used to establish the Regulation II cap in 2011, regulated issuer costs have not declined.
  • Banks of all sizes were affected.
    • Although the Board’s 2011 rule was supposed to protect small community banks and credit unions from the impact of the interchange fee price controls, the Board’s current data shows that merchants and networks have forced small debit card issuers to accept interchange fees only slightly above the cap on single-message card networks, a trend that will likely get worse as a result of the Board’s 2022 dual-routing rule.


About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

About the Consumer Bankers Association

The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on X @consumerbankers.

About The Clearing House

The Clearing House operates U.S-based payments networks that clear and settle more than $2 trillion each day through wire, ACH, check image, and real-time payments. It is the nation’s most experienced payments company, with a long track record of providing secure and reliable systems, payments innovation, and strategic thought leadership to financial institutions. In 2017, The Clearing House revolutionized U.S. payments by introducing the RTP® network, which supports the immediate clearing and settlement of payments, along with the ability to exchange related payment information across the same secure channel. These RTP capabilities enable all financial institutions to offer safer, faster, and smarter digital transaction services for their corporate and retail customers. Learn more at www.theclearinghouse.org.

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