Page 13 - August 22, 2024 Bulletin
P. 13

Rob Nichols
                           President and CEO
                           American Bankers Association
                           nichols@aba.com





                                                           Washington Update



        Defend the Dual Banking System




        Since the time of President Lincoln, American consumers   for debit card transactions and does not carve out taxes
        have benefited from a dual banking system, made up of   and gratuities.
        both state-chartered institutions and federally chartered   This law, a gift to corporate mega-retailers as part of a
        national banks.                                         last-minute budget deal, is the first of its kind to pass in
        This system—which can trace its roots back to the U.S.   the nation.  We can’t let it stand and run the risk other
        Constitution—allows consumers to have more choices.     states follow, which is why ABA is fighting back.
        It offers them a robust marketplace of banks of different   Together with the Illinois Bankers Association, America’s
        sizes and business models to meet their needs. And it   Credit Unions and the Illinois Credit Union League, we
        enables the nation’s more than 750 national banks to    filed a lawsuit challenging the law, and we are seeking
        operate  safely,  soundly  and  efficiently  across  multiple   a preliminary injunction pausing implementation until
        jurisdictions under the supervision  of  the OCC, while   the court can rule on the merits of our case. With top
        at the same time allowing state banks to serve their    outside lawyers assisting us, we have confidence we will
        communities with local supervision.                     prevail in this case, sending a strong message to other
        But this system, which  has served  our country well    states looking to follow Illinois’ lead.
        for more than 150 years, is now coming under threat,    We’ve  seen  a  different  kind  of  challenge  to  the  dual
        as  lawmakers  in  both  red  states  and  blue  states  have   banking system in other states. Florida and Tennessee
        begun to pass laws that will interfere with national    have put in place their own safety and soundness tests,
        bank operations, violate federal preemption and tread   encroaching on the OCC’s federal overnight of national
        squarely on the OCC’s turf.                             banks.

        Just look at the situation currently unfolding in Illinois,   Like ABA, the OCC has taken notice.
        with the Interchange Fee Prohibition Act that was signed
        into  law  this  summer  as  part  of  the  state’s  budget   We’ve been encouraged by comments from Acting
        legislation. This misguided law bans banks, credit unions,   Comptroller Michael Hsu noting that his agency will
        payments networks and other entities from charging or   continue to defend the dual banking system. The
        receiving interchange fees in Illinois on taxes and tips   acting comptroller pointed out in recent remarks that
        charged as part of a credit or debit card transaction.   “increasingly, banks are being asked  by states to pick
                                                                a  side  in  service  of  performative  politics  rather  than
        This  law—which  will  create  unprecedented  chaos  and   deliberative  policy.”  This  simply  shouldn’t  be  the  case,
        confusion  for consumers and  businesses if  allowed  to   and  we  will  continue  to  urge  the  OCC  to  exercise  its
        take effect—violates multiple federal statutes, including   authority when states cross the line.
        the National Bank Act and the Federal Credit Union Act,
        and cannot be enforced against national banks, federal   Our dual banking system has served Americans well for
        savings institutions or state-chartered banks, as well as   decades. ABA will continue to push back against efforts
        federally and state-chartered credit unions. It also runs   to undermine that system, and we’ll keep pressure on
        afoul of the Electronic Fund Transfer Act, which directly   regulators to do the same.
        addresses the permissible amount of interchange fees








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