On December 16, the Board of Governors of the Federal Reserve System met and proposed a way to implement the debit card interchange fee and routing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Board has requested comment before February 22, 2011, on their proposed rule that would establish debit card interchange fee standards and prohibit network exclusivity arrangements and routing restrictions.
Here is a copy of the comment I have sent to the Board:
Board of Governors of the Federal Reserve System,
20th Street and Constitution Avenue NW
Washington DC 20551
RE: Comments to Docket 1404 – Debit Card Interchange Fee and Routing
I am the CEO of Plastyc Inc., a company devoted to delivering financial services to the tens of millions of under-banked Americans.
We provide re-loadable prepaid card services in partnership with banks with less than $10B in assets.
Therefore, we are not impacted by the proposed regulations and can comment with the benefit of a position of neutrality.
We are particularly concerned by the un-intended negative consequences which are likely to impact the un-banked, under-banked and low income Americans. Below is a summary of such concerns, and suggestions on how to address them:
|Issue||Why will under-banked and low-income consumers
be negatively impacted
|Suggested corrective action|
|Exclusion of fixed costs from the fee evaluation method, and delayed evaluation of fraud adjustment provisions||As fixed costs to support risk management teams, charge-back processes and customer disputes support are excluded, issuers will charge for them through other service fees. Well-off consumers will afford first-class support provided by US-based teams, while second-rate support off-shored to foreign countries will be provided to lower-income consumers.||
|Merchants will be able to dictate the PIN versus signature based user identification method||Under-banked and low-income consumers are highly concerned by the security of their limited funds and will feel threatened if a particular method of lesser security or lesser consumer liability limitation is imposed by merchants in certain settings.||Keep the choice of identification method in the hands of the consumer|
|Exclusion of banks with less than $10B in assets combined with allowing merchants to set card acceptance threshold rules||Consumers carrying the “wrong” cards, i.e. cards issued by smaller banks, risk being declined by large merchants wanting to favor cards from larger banks.||Explicitly prevent merchants from using the identity of their customers’ issuing banks to adjust their routing choices or to enforce card acceptance thresholds.|
I remain at your disposal for any further input you may require.
Very Respectfully Yours,