Debit Cards

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As we previously blogged, the Board of Governors of the Federal Reserve (the “Board”) held an open meeting on October 25, 2023 to discuss the debit card interchange fee cap. The debit card interchange fee cap was part of the so-called “Durbin Amendment” to the Dodd-Frank Act, which required the Board to promulgate a regulation applicable to banks having more than $10 billion in assets establishing maximum debit card interchange fees that are “reasonable and proportional to the actual cost” of processing the transaction.… Continue Reading

The Board of Governors of the Federal Reserve (FRB) is holding an open meeting on October 25, 2023 to discuss proposed revisions to the Board’s debit interchange fee cap contained in Regulation II, which implemented the Durbin Amendment.  For large issuers (with $10 billion or more in assets), Section 235.3(a) of Regulation II requires an issuer to charge interchange fees that are “reasonable and proportional to the cost incurred by the issuer with respect to the electronic debit transaction” and Section 235.3(b) of Regulation II caps such fees at 21 cents plus 0.05% of the transaction.… Continue Reading

Last Friday, the U.S. Supreme Court agreed to decide when a right of action first accrues for an Administrative Procedure Act (APA) challenge to a final rule issued by a federal agency—when the final rule is issued or when the rule first causes injury.

In April 2021, the North Dakota Retail Association, North Dakota Petroleum Marketers Association and Corner Post, Inc.… Continue Reading

On October 3, 2022, the Federal Reserve finalized a rule expanding Regulation II (Debit Card Interchange Fees and Routing), the implementing regulation for the Durbin Amendment.  The final RULE is substantially similar to the proposed rule issued in 2021 and requires online (card not present) debit card transactions to be enabled for processing on at least two unaffiliated payment card networks. … Continue Reading

The Fed’s final rule implementing the Durbin Amendment (Regulation II) went into effect in October 2011.  Nearly ten years later, the final rule is still provoking controversy in the form of a new lawsuit and proposed amendments to the rule and its official commentary.

The Durbin Amendment (Section 1075 of Dodd-Frank) authorized the Fed to issue regulations to ensure that the amount of any interchange fee received by a large debit card issuer (one with at least $10 billion of assets, together with its affiliates) is reasonable and proportional to the cost incurred by the issuer. … Continue Reading

On April 22nd, Senator Warren, nine other Senators, and 14 members of Congress sent a letter (the “Letter”) to Secretary of Education Duncan urging that the Department of Education (DOE) exercise its rulemaking authority to regulate, limit or outright ban certain practices when colleges enter into agreements with financial providers to offer debit cards, prepaid card and other products which are used for purposes of distributing federal student financial aid to students. … Continue Reading

The U.S. Government Accountability Office (GAO) has joined the CFPB’s call for more transparency in the area of campus financial products.  Last week, the GAO issued a report on college debit cards in which the GAO recommended that Congress consider requiring financial institutions that provide debit and prepaid card services to colleges to publicly disclose their agreements. … Continue Reading

The CFPB wants financial institutions to post on their websites their marketing agreements with colleges and universities for financial products other than credit cards, such as deposit accounts, prepaid cards and financial aid disbursement accounts.  Pursuant to the CARD Act, card issuers must submit their campus credit card agreements annually to the CFPB together with their related marketing agreements and certain information, including the amount of compensation they paid to schools. … Continue Reading

Findings on campus banking products released this past Monday by the CFPB in conjunction with a Banking on Campus Forum held in Washington, D.C. appear to be a harbinger of new limitations on the marketing of these products.  The findings were based on comments the CFPB received in response to a January 2013 notice seeking input on a variety of issues with regard to these products, including the information shared between schools and financial institution providers, the way these products are marketed, the fee structures for these products, how marketing arrangements are established, and student experiences with these products. … Continue Reading

Comments made by Director Cordray in an interview with the Washington Post indicate that the CFPB will be taking an aggressive approach to rulemaking in the coming months. 

Director Cordray indicated that prepaid cards are “a real front-burner issue for us” and that the CFPB is “moving forward to write rules to make sure they are protected under the [Electronic Fund Transfer Act.]”… Continue Reading