Federal Reserve Announces it Will Extend the Comment Period on its Interchange Fee Proposal Until May 12, 2024

Regulatory Developments

Federal Reserve Announces it Will Extend the Comment Period on its Interchange Fee Proposal Until May 12, 2024 and Published Additional Related Data
On January 22, the Federal Reserve announced that it will extend the comment period for its previously announced interchange fee proposal until May 12. The comment period was originally set to end on February 12. Currently, interchange fees are capped at 21 cents per transaction, plus a small percentage-based amount. The proposed rule would lower the cap of the fixed amount to 14.4 cents per debit transaction, while also creating a mechanism to automatically update the fee cap every other year based on survey data received from large card issuers. Small card issuers with under $10 billion in assets will continue to be exempt from the fee cap.

Along with its announcement, the Federal Reserve published additional data related to the proposal. Any interested party may submit comments through the Federal Reserve website.

Federal Reserve and FDIC Extend Resolution Plan Submission Deadline for Some Large Financial Institutions
On January 16, the Federal Reserve and FDIC announced an extension of the resolution plan submission deadline for certain large financial institutions. Section 165(d) of the Dodd-Frank Act and its implementing rule require that “covered companies” make periodic reports to the FDIC and the Federal Reserve. These reports, informally known as “living wills,” must contain information concerning the companies’ strategies in the event of their financial failure. These living wills must be submitted to the agencies every three years, absent an extension.

This announcement extends the deadline to submit the living will, previously required by July 1, 2024, to March 31, 2025. The Federal Reserve and FDIC are currently in the process of developing finalized guidance to assist covered companies in the creation of living wills. The extended deadline is intended to give the agencies time to review the comments on their earlier proposed guidance, to finalize it, and to ensure that the covered companies have sufficient time to comply once the finalized guidance is released.

“Combatting misrepresentations about deposit insurance coverage goes to the heart of the FDIC’s mission of maintaining stability and public confidence in the nation’s banking system. These practices can not only confuse and harm those who are targeted with the false promise of deposit insurance, but, if left unchecked, could also undermine confidence in the FDIC, FDIC–insured banks, and the U.S. banking system.”
‒ Martin J. Gruenberg, Chairman, FDIC

FDIC Demands That Five Entities Cease Making False or Misleading Representations about Deposit Insurance
On January 19, the FDIC issued letters demanding that Atmos Financial, PBC, BybitcoinEx, Inc. ORGANO Payments, Inc. and its subsidiary OGPay; Horizon Globex GmbH (Horizon), which operates Upstream Exchange; and Zil Money Corporation cease and desist from making false and misleading statements concerning FDIC deposit insurance in violation of section 18(a)(4) of the Federal Deposit Insurance Act and its implementing regulation, 12 C.F.R. Part 328, Subpart B (“Part 328”) and demanding that these entities take immediate corrective action to address such statements, including removing any and all misleading statements. The letters also note that they constitute advisory letters within the meaning of 12 C.F.R. § 328.106, with the result that continuing and/or future false or misleading deposit insurance representations may be deemed to have been knowingly made.

These letters follow the FDIC’s December 20, 2023, adoption of a final rule amending Part 328, updating the FDIC’s regulations regarding false advertising, misrepresentations of deposit insurance coverage, and misuse of the FDIC’s name and logo.

NYDFS Issues Guidance on the Assessment of the Character and Fitness of Directors, Senior Officers, and Managers
On January 22, NYDFS released guidance regarding the review and assessment of the character and fitness of directors and senior officers. The guidance applies to New York State-regulated banking organizations and regulated non-depository financial institutions, including foreign banking organizations (covered institutions). It applies to each member of a covered institution’s board of directors, board of trustees, and/or board of managers, as applicable, and each senior officer. NYDFS emphasizes that covered institutions have discretion in implementing the guidance and should take a risk-based approach based on the complexity and risk profile of the institution.

CFPB Proposes Rule to Eliminate NSF Fees In Transactions Instantaneously Declined by a Financial Institution
On January 24, the CFPB continued its initiative to eliminate junk fees by proposing a rule to prohibit banks, credit unions, and other financial institutions from charging an NSF fee when declining transactions with no significant perceptible delay after the consumer initiates the transaction (i.e., instantaneously or near-instantaneously, in real time, or right at the swipe, tap, or click), such as declined debit card purchases, ATM withdrawals, and certain peer-to-peer payments. Charging NSF fees under these circumstances would constitute an abusive act or practice in violation of the Consumer Financial Protection Act. Comments on the proposed rule must be received by March 25th.

Staff Statement on Rule 6c-11(c)(1)(i)(C) Regarding Description of Foreign Currency Holdings
On January 19, the SEC’s Division of Investment Management (“Staff”) issued a statement expressing its views regarding exchange-traded funds’ (“ETFs”) disclosure of foreign currency holdings on their website as needed to comply with the daily portfolio holdings disclosure requirements of Rule 6c-11 under the Investment Company Act of 1940. Under Rule 6c-11, ETFs are required to disclose their portfolio holdings daily. In terms of foreign currency holdings, the Staff noted that some ETFs are only identifying such positions as “cash”. In the statement, the Staff stated its view that describing foreign currency holdings as “cash” does not allow investors to distinguish between U.S. dollar holdings and foreign currency holdings for arbitrage purposes. In order to comply with Rule 6c-11, the Staff’s view is that ETFs should identify the specific foreign currency.

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