WASHINGTON, Feb. 17, 2011 /PRNewswire/ -- Today, Federal Reserve Chairman Ben Bernanke confirmed during testimony before the Senate Banking Committee that the Federal Reserve debit card rule could harm community banks, credit unions, and consumers.
In response to questions, Chairman Bernanke acknowledged that the rule's so-called "carve-out" for small institutions may not work, saying, "There is some risk that the exemption will not be effective, and that is the interchange fees available to smaller institutions will be reduced to the same extent we would see it at larger banks."
Chairman Bernanke also stated that consumers may have to pay more as a result of the rule: "It is possible some of those costs would get passed on to consumers in some way, for example, a charge from a debit card."
Chairman Bernanke's conclusions were further supported during testimony from Federal Reserve Governor Sarah Raskin and industry representatives before the House Subcommittee on Financial Institutions and Consumer Credit. Governor Raskin also acknowledged concern about the carve-out stating that there are legitimate questions about how the exemption would work and that "impact on small financial institutions needs to be further examined."
The Electronic Payments Coalition issued the following statement about today's hearings on the Federal Reserve debit card interchange rule in the U.S. Senate and House of Representatives:
"This regulation is, by definition, government price fixing. It sets the rate at 70 to 90 percent below free market levels and will have all the harmful effects that result every time the government picks winners and losers. This rule will hand the nation's largest retailers a $12 billion windfall, leaving consumers to pick up the tab. Debit card users could see higher fees, fewer rewards, and the loss of services like free checking. We urge Congress to stop the implementation of this harmful rule."
About the Electronic Payments Coalition
The Electronic Payments Coalition (EPC) includes credit unions, banks, and payment card networks that move electronic payments quickly and securely between millions of merchants and millions of consumers across the globe. EPC's goal is to protect the value, innovation, convenience and competition in today's growing electronic payments system. EPC educates policymakers, consumers, and the media on the system's role in economic growth, and the importance of protecting consumer choice and stability for the continued growth of global commerce.
SOURCE Electronic Payments Coalition