SE North Carolina News

Washington, D.C. — Senator Ted Budd (R-NC) has introduced the Secure Payments Act, which mandates the Federal Reserve to pause its Regulation II Debit Card Interchange Fee proposal until a comprehensive quantitative impact study is conducted on its effects on consumer costs and the broader economy.

Regulation II was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 and enforced by the Federal Reserve. The regulation set caps on fees retailers pay for debit card services. In October 2023, the Federal Reserve proposed further reductions in these caps.

Since the implementation of debit interchange price caps in 2011, there has been a decline in banks and credit unions offering free checking accounts from 60 percent to less than 20 percent. Additionally, checking account fees for regulated institutions have more than doubled. According to a 2017 FDIC Survey of Unbanked and Underbanked Households, nearly 30% of respondents who previously had accounts reported closing them due to high or unpredictable fees.

The bill is co-sponsored by Senators Thom Tillis (R-NC), Steve Daines (R-MT), Bill Hagerty (R-TN), and Katie Britt (R-AL). It has garnered support from several organizations including:

- American Bankers Association

- America’s Credit Unions

- Bank Policy Institute

- Carolinas Credit Union League

- Consumer Bankers Association

- International Bancshares Corporation

- Independent Community Bankers of America

- North Carolina Bankers Association

A corresponding bill was introduced in the House by Rep. Blaine Luetkemeyer (R-MO).

Senator Budd stated: “The Federal Reserve’s Regulation II is a misguided policy that hurts everyday North Carolinians, especially those in minority communities. Indiscriminately imposing government price caps on debit card services makes it harder for people to open bank accounts and forces banks to end popular perks like free checking. Before the Federal Reserve moves forward with this proposal, they must take into account the damage it will do to consumers across the country.”

Jim Nussle, President and CEO of America’s Credit Unions, commented: “Credit unions need access to as many resources as possible to provide critical services in rural and underserved communities across America, and we’ve already seen that debit interchange restrictions limit those resources and ultimately hurt consumers. The Federal Reserve’s proposal to reform all three components of the Regulation II interchange fee cap deserves a study to fully understand its potential consequences."

Greg Baer, President and CEO of Bank Policy Institute said: “We support this legislation unequivocally. The Fed’s proposal will undermine the availability of low-cost deposit accounts, directly harming low-and-moderate-income consumers.”

Rob Nichols, President and CEO of American Bankers Association added: “Overwhelmingly, members of the public – ranging from community banks and civil rights activists to economists and everyday Americans – have spoken out about the real harms the Fed’s proposal would cause banks, their customers and communities."

Lindsey Johnson, President and CEO of Consumer Bankers Association remarked: "In recent months, we have seen broad pushback from consumer advocates, legislators, and industry on the Federal Reserve’s misguided proposal."

Rebeca Romero Rainey, CEO of Independent Community Bankers of America stated: “The Federal Reserve’s debit card proposal doesn’t use full data from community banks... ICBA strongly supports Sen. Budd’s Secure Payments Act.”