ABA Urges Fed to Revise Interchange Rule

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WASHINGTON — The American Bankers Association called on the Federal Reserve Board Monday to revise its debit interchange rule by considering a broader range of costs necessary to maintain the system.

In a letter to Chairman Ben Bernanke, ABA chief executive Frank Keating said the Fed rule should consider fixed and overhead costs, as well as fraud prevention costs, network fees, and customer service costs. Failure to make revisions could increase costs for consumers, reduce bank capital and lending, and lead to more community bank failures, the letter said.

"It is imperative that adequate allowances for fraud prevention costs be included in any determination of allowable debit costs under the rule - to both compensate institutions for such costs and incentivize investments in efforts that protect consumers, enhance security and maintain market confidence in the payments system," Keating said.

The group said expanding allowable industry costs could also help reduce market incentives to drive business away from community banks to lower-cost providers.

Keating also asked the board to extend any compliance deadlines by at least three months.

"The rule proposed by the board will have enormous impact on the existing payments system infrastructure which, if done in haste, could have sizeable negative impacts for individuals, consumers and our broader economy," he said.

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