Fed proposes to lower debit card interchange cap for large issuers

The Federal Reserve Board is requesting comment on a proposed rule that would lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward.

By law, the Board is required to establish standards for assessing whether an interchange fee received by a large debit card issuer for processing a transaction is reasonable and proportional to certain issuer costs. The Board first implemented this statutory requirement in 2011, setting an interchange fee cap for debit card issuers with $10 billion or more in assets. The proposal would adjust the interchange fee cap to reflect changes in issuer costs since the rule first took effect. For example, the cap on an average-sized $50 debit card transaction would decline from 24.5 cents under the current rule to 17.7 cents under the proposal. In addition, the proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the Board from large debit card issuers.

The Board also released its latest biennial report detailing data collected from large debit card issuers on interchange fees, issuer costs, and fraud related to debit card transactions in 2021.

Comments on the proposal will be accepted for 90 days following publication in the Federal Register.

PUBLICATION UPDATE: Published 11/14/2023; Comments due 2/12/2024. On January 22, 2024, the Board announced it will extend the comment deadline to May 12, 2024. It also provided additional data concerning the base component of the interchange fee cap on its website.