ICLE on Regulation II’s Debit-Fee Caps

ICLE comments to the Federal Reserve on a proposal to amend Regulation II, which caps the fees that can be charged to merchants for processing debit-card transactions, were cited in a story by PYMNTS. You can read the full piece here.

In a missive from the International Center for Law and Economics, the authors wrote that the fee caps, as initially debuted under Regulation II more than a decade ago, wound up harming lower-income consumers and “benefitted the shareholders of large merchants.” The data show, per studies from the University of Pennsylvania, that banks lost more than $5.5 billion annually, and recouped at least some of those losses by reducing free checking account availability and boosting checking account fees.

“Monthly minimums to avoid these fees rose by 21 percent, and monthly fees on interest bearing checking accounts also rose by nearly 14 percent,” said the Center, which added in its conclusion that “Since it remains ‘difficult to determine empirically’ the efficient interchange fee for any card network, the Board should acknowledge that markets are the best mechanism to establish such fees, and remove the price controls altogether.”