Organizations file comments with the Federal Reserve Board of Governors in response to latest proposed rulemaking
CHICAGO – The National Restaurant Association and the Restaurant Law Center (RLC) have submitted comments to the Federal Reserve System Board of Governors regarding the “Debit Card Interchange Fees and Routing” Notice of Proposed Rulemaking (NPRM). In their submission, the organizations express support for the Board’s review of debit card interchange rates but urge a reduction below the proposed target and the elimination of additional fees to ensure fairness for debit card issuers, restaurants, and diners.
The organizations highlighted several key points in their comments:
- Impact on Small-Ticket Merchants: Emphasized the significant effect an updated interchange fee cap would have on small-ticket merchants, such as restaurant operators.
- Base Component Reduction: Recommended lowering the base component of the interchange fee cap to 6 cents, instead of the proposed 14.4 cents.
- Ad Valorem Component: Called for the elimination of the ad valorem component of the interchange fee cap.
- Fraud-Prevention Adjustment: Suggested reducing the fraud-prevention adjustment from 1 cent and conditioning it on demonstrated issuer effectiveness.
- Audit and Enforcement Plans: Proposed establishing audit and enforcement mechanisms to ensure the biennial automatic update to the interchange fee cap remains reasonable and proportional to issuer costs.
The Fed Board of Governors is mandated by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act to review debit card interchange fees every two years to ensure they are reasonable and proportionate to issuer costs. The NPRM is a response to the most recent evaluation.
Data from Circana/CREST shows that in 2023, 70% of restaurant customers who paid with a credit/debit card or cash used a card, up from 53% in 2018.
“Since the pandemic, restaurant operators have seen a significant increase in payments made via credit and debit cards,” said Brennan Duckett, director of Technology and Innovation Policy for the National Restaurant Association. “The more cards are swiped, the higher the costs for operators. The Board should set the interchange fee caps to prevent small-ticket merchants, like restaurants, from being unfairly impacted.”
The comments also address the need to lower the ad valorem component, citing the Board’s findings that from 2011-2021, financial institutions shifted two-thirds of all fraud losses onto merchants and consumers. Given these findings, the Association stresses the urgency of reducing or eliminating this component.