Legislative Update: Part 2

I’m sure everybody reading this has been sitting on pins and needles, waiting for Part 2 to drop. Well, your wait is over! The following are more key legislative updates you need to know about.

Durbin Amendment: You are probably familiar with the Durbin Amendment. It passed as part of the Dodd-Frank Act and it requires all banks to provide merchants with two unaffiliated debit networks in certain situations, and it caps interchange on debit card transactions for banks with more than $10b in assets. Regulation II implements those statutory requirements. The Credit Card Competition Act of 2023 (CCCA) would require banks with more than $100B in assets to offer merchants multiple credit card processing networks from among a list of networks determined by the Federal Reserve, not the card issuer. That is a high threshold, but it is easy to see the effects of this rule trickling down and impacting small banks as merchants shift transactions onto less secure networks and credit card rewards are gutted. Foreseeably credit card fee income may drop for even smaller banks due to competition with other networks subject to the rule who are required to drop fees. The amendment has not yet passed, so there is still time to urge your member of Congress to oppose the CCCA if you so choose.

Digital Assets: The digital asset market includes a range of instruments from speculative and volatile cryptocurrencies to “stablecoins” backed by a collection of assets to digital representations of customer bank deposits on a blockchain. Each category of digital asset has a unique risk profile. There is no comprehensive regulatory framework that establishes guidelines for risk management and consumer protection in the digital asset market. In July, the House Financial Services Committee passed two digital asset bills out of committee, and both are pending action on the House floor. One broadly establishes a regulatory framework for digital asset companies, and the second establishes a regulatory framework for stablecoin issuers.

Overdraft: You are likely familiar with the CFPB’s proposed rule imposing additional restrictions on overdraft protection services as part of its effort to reduce or eliminate fees that it labels “junk fees.” The proposal would apply the Truth in Lending Act (TILA) and Regulation Z requirements to overdraft protection services offered by banks and credit unions with assets of more than $10B that charge an overdraft fee above a certain dollar threshold. An institution would be exempt from this application of Regulation Z only if it charges a “true courtesy” fee using one of the two calculations: (1) a fee that reflects the institution’s “breakeven” costs, including charge-off losses, to operate its overdraft program; or (2) a fee that conforms to a “benchmark” fee set by the CFPB. The Bureau has proposed $3, $6, $7, or $14 as potential benchmarks. The CFPB ceased accepting comments earlier this month and it remains to be seen if a final rule will be issued.