Federal Reserve Requests Comment on a Proposal to Lower The Maximum Interchange Fee that a Large Debit Card Issuer Can Receive for a Debit Card Transaction

Regulatory Developments

Federal Reserve Requests Comment on a Proposal to Lower The Maximum Interchange Fee that a Large Debit Card Issuer Can Receive for a Debit Card Transaction
On October 25, the Federal Reserve requested public comments on a notice of proposed rulemaking (the proposed rule) to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The comment period will close 90 days after the proposed rule is published in the Federal Register.

The proposed rule would establish a regular process for updating the maximum interchange fee amount every other year going forward. The Federal Reserve is required to establish standards for assessing whether an interchange fee received by a large debit card issuer for processing a transaction is reasonable and proportional to certain issuer costs. The Federal Reserve first implemented this statutory requirement in 2011, setting an interchange fee cap for debit card issuers with $10 billion or more in assets.

The proposed rule would adjust the interchange fee cap to reflect changes in issuer costs since 2011. For example, the cap on an average-sized $50 debit card transaction would decline from 24.5 cents under the current rule to 17.7 cents under the proposal. Finally, the proposed rule would adopt an approach for future adjustments to the maximum interchange fee amount, which would occur every other year based on issuer cost data gathered by the Board from large debit card issuers.

Agencies Issue Principles for Climate-Related Financial Risk Management for Large Financial Institutions
On October 24, the Agencies issued principles that provide a high-level framework for the safe and sound management of exposures to climate-related risks. The principles are intended to apply to financial institutions with $100 billion or more in total assets. The principles are divided into two categories: (1) general risk principles, which are provided with respect to governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement, and reporting; and scenario analysis; and (2) risk assessment principles, which describe how climate-related financial risks can be addressed in credit risk, liquidity risk, other financial risk, operational risk, legal and compliance risk, and other nonfinancial risk. The final principles are substantially similar to the draft principles released in December 2022.

“The Federal Reserve has narrow, but important, responsibilities regarding climate-related financial risks, which are tightly linked to our responsibilities for bank supervision. Banks need to understand, and appropriately manage, their material risks, including the financial risks of climate change.”

‒ Jerome H. Powell, Chairman of the Board of Governors of the Federal Reserve System

FDIC Issues a Proposal to Revise Federal Deposit Insurance Act Regulations Concerning Section 19
On October 24, the FDIC announced a proposed rule to update the FDIC’s regulations concerning section 19 of the Federal Deposit Insurance Act (12 U.S.C. § 1829) (Section 19), which prohibits a person from participating in the affairs of an FDIC-insured institution if he or she has been convicted of an offense involving dishonesty, breach of trust, or money laundering, or has entered a pretrial diversion or similar program in connection with a prosecution for such an offense, without the prior written consent of the FDIC, among other provisions. The purpose of this proposed rule is to implement and conform with the Fair Hiring in Banking Act (FHBA).

The proposed rule would incorporate statutory changes to Section 19, including:

• Excluding certain offenses from the scope of Section 19 based on the amount of time that has passed since the offense occurred or since the individual was released from incarceration;
• Excluding certain offenses from the scope of Section 19 if one year or more has passed since the applicable conviction or program entry;
• Excluding certain offenses from the definition of “criminal offenses involving dishonesty,” including “an offense involving the possession of controlled substances”;
• Excluding certain convictions from the scope of the Section 19 that have been expunged, sealed, or dismissed; and
• Prescribing standards for the FDIC’s review of applications submitted under Section 19. 

The proposed rule also provides interpretive language that addresses, among other topics, when an offense “occurs” under the FHBA, whether otherwise-covered offenses that occurred in foreign jurisdictions are covered by Section 19, and offenses involving controlled substances.

SEC’s IM Division Updated FAQs on Form ADV and IARD
On October 26, the SEC’s Division of Investment Management staff updated its “Frequently Asked Questions” on Form ADV and IARD (FAQs) to provide additional guidance from the staff regarding specific questions concerning Form ADV as well as the IARD system through which filers submit Form ADV and amendments. The updated FAQs address several topics, including registration with the SEC, filings regarding adviser succession, filings made by exempt reporting advisers, switching reporting status (e.g., SEC registered or state registered) and filing an annual updating amendment, among other topics. The FAQs also address questions about accessing the IARD system. A marked copy of the FAQs highlighting the recent updates can be found here.

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On November 9, Goodwin's global Digital Currency and Blockchain team will be hosting a client event in the London office that will feature a panel discussion about the recent wave of US and UK regulatory developments. Please reach out to events@goodwinlaw.com for more information or to register.

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