Understanding the Federal Reserve Board Proposal to Lower Interchange Fee Cap for Debit Card Transactions

Consumer Finance Monitor

Our special guest is Zarik Khan, Founder of Finsolute Advisors. In October 2023, the Federal Reserve Board issued a proposal to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. We first look at the roles of the various parties involved in a typical transaction in which a consumer uses a debit card to make a purchase from a merchant and the various fees imposed in connection with the transaction. We then discuss how the current debit interchange fee cap contained in the Fed’s final rule implementing the Durbin Amendment (Regulation II) that went into effect in October 2011 has impacted each of the parties involved in a typical debit card transaction, the Fed’s rationale for its new proposal and related study, and the proposal’s implications for each of the parties. We conclude with a discussion of the proposal’s prospects and the potential impact of a U.S. Supreme Court decision overruling Chevron on the proposal if implemented.

Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation.