America’s Credit Unions has called on the Federal Reserve to withdraw its 2023 proposed Regulation II changes to debit interchange until legal challenges have been resolved.
The organization shared this and other credit union priorities in a letter submitted to the House Financial Services Committee ahead of Federal Reserve Chair Kevin Warsh’s Tuesday (July 14) appearance before the committee in a hearing, according to a Tuesday press release.
In its letter, America’s Credit Unions said that while the Fed has indicated that it doesn’t plan to finalize the proposed amendments to Regulation II was litigation is still active, it has not withdrawn the proposal.
“Withdrawing the 2023 Proposed Rule would signal clearly that the matter of revising Regulation II is closed until litigation clarifies its legal status, while providing needed certainty to the debit card market for the foreseeable future while waiting for the resolution of the ongoing challenges,” the organization wrote in its letter.
PYMNTS reported in October that in a number of court battles, merchants have claimed that interchange fee caps are too high, while banks have said the fees are needed to fund innovation and security efforts.
America’s Credit Unions also suggested in the letter that the Fed carefully evaluate the operational and credit risks of modifying how it governs access to Federal Reserve master accounts.
“Applicants that are not regularly supervised in the same ways as insured depository institutions could pose risks to the reliability and safety of Reserve Bank payments infrastructure,” the organization wrote in the letter.
PYMNTS reported in May that the Federal Reserve is evaluating the legal, regulatory and policy framework governing access to Reserve Bank payment accounts and services by uninsured depository institutions and nonbank financial companies.
A third issue America’s Credit Unions raised in its letter involved a request that the Fed engage with the Consumer Financial Protection Bureau (CFPB) to reconsider the check hold rules and exceptions under Regulation CC and to incentivize a transition to digital payments. Regulation CC, which implements the Expedited Funds Availability Act, permits only a five-day hold and has made credit unions vulnerable to check fraud, the organization said.
“The mismatch between the time when funds must be made available and the time needed to fully learn whether a check is payable continues to contribute to significant fraud losses,” America’s Credit Unions said in the letter.
PYMNTS reported in June that advocates of changing the current law say that the law requires financial institutions to make funds from checks and wire transfers available within a prescribed timeframe, even when the transaction is suspicious.
The post Credit Unions Ask Fed to Freeze Debit Interchange Plan Until Courts Rule appeared first on PYMNTS.com.
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