In a speech delivered at the 2023 Ohio Bankers League "Main Event" in Columbus, Ohio, Federal Reserve Governor Michelle W. Bowman expressed concerns over regulatory proposals that could impact credit card processing and related industries.
Governor Bowman told the group on Nov. 7 that she had reservations about a proposed regulatory cap on debit card interchange fees, an idea introduced by the Federal Reserve late last month.
"I am concerned that the costs of this fee cap revision for consumers—through the form of increased costs for banking products and services—will be real, while the benefits to consumers—such as lower prices at merchants—may not be realized,” Bowman told attendees at the event.
Bowman questioned the fairness of the proposal, stating that it might lead to increased costs for banking products and services, impacting consumers, particularly low-income individuals who may not qualify for other credit options.
“In many instances these fees—including interchange fees—support a bank's ability to offer low-cost or no-cost banking products or services to customers,” she said.
According to Bowman, changes proposed by the Federal Reserve could discourage banks from offering certain products, and said this would result in "potentially limiting financial inclusion and access for vulnerable communities."
Bowman also criticized the lack of clarity and potential distractions from core risk management objectives in the recently published climate guidance.
While claiming that addressing climate-related financial risks is an important objective of the proposed rule changes, she said the changes could impose substantial compliance costs on financial institutions, impacting their ability to focus on essential areas such as credit risk, interest rate risk, and liquidity risk.
"Ultimately, the net result of this proposal may be to simply shift costs from merchants to bank customers, and to make those costs far less transparent,”Bowman said.
These concerns are particularly relevant to credit card processing companies, which might face additional administrative burdens due to the increased regulatory requirements.
In her remarks, Governor Bowman said it is important that any proposed changes result from a process that is transparent, and that consider the potential consequences for the credit card processing industry and its customers.
Governor Bowman urged regulators to consider the industry's unique challenges and ensure that any new policies do not inadvertently hinder the functioning of credit card processing services.
Prior to her service at the Federal Reserve, Bowman served as the State Bank Commissioner of Kansas, overseeing state-chartered banks and thrifts. She is serving a second term as a Federal Reserve Governor. She was first appointed to the Fed in 2018.
