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FDIC Expresses Concern About Fed Interchange Proposal

Posted on 3/14/2011

The FDIC is concerned about the impact the Federal Reserve's proposed debit-card interchange rule will have on community banks and their customers, FDIC Chairman Sheila Bair said last week in a letter to Federal Reserve Chairman Ben Bernanke.

"Specifically, we are concerned that these institutions may not actually receive the benefit of the interchange fee limit exemption explicitly provided by Congress, resulting in a loss of income for community banks and ultimately higher banking costs for their customers," Bair wrote.

Bair recommended, among other things, that the Fed require the card networks to create two-tiered fee schedules; gain more information on the costs incurred by issuers of all asset sizes and revise its fee cap proposal as appropriate; and specify a placeholder amount of fraud prevention costs that can be used to adjust the interchange fee cap. Read the letter.

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