Frank Urges Caution on Interchange, Complains About Amendment in Overhaul Bill
House Financial Services Committee Chairman Barney Frank expressed concern to the Federal Reserve that regulations limiting interchange fees could increase the regulatory burden on credit unions and other small financial institutions.
In a letter mailed Wednesday, Frank (D-Mass.) wrote Federal Reserve Chairman Ben Bernanke that the regulations "if not properly crafted, may have unintended consequences for consumer choice, the protection of consumer information, and Congress' intent to reduce the burdens on community banks, credit unions and government benefit programs.''
The Fed's proposed rule capped debit interchange at no more than 12 cents per transaction. This would be a flat fee whereas debit interchange is currently calculated as a percentage of a transaction, often around 1%.
In a CNBC interview on Friday, the day after the Fed issued its proposed regulation, Frank criticized the fact that the interchange amendment was even included in the final version of the financial overhaul bill at all.
"The Senate, while we were doing financial reform, added something that I don't think is really financial reform nor really a consumer activity, but they insisted on it. We had to do that to get the bill through. And that was to legislate restrictions on what the credit card companies can charge to the merchants,'' he said.
Frank was the chief House sponsor of the financial overhaul bill. He will leave the chairmanship of the committee at the end of the current Congress later this month because the GOP won control of the chamber in last month's election.