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Bachus presses interchange rule review

Friday 31 December 2010 - by Will Henley

Spencer Bachus (left) and Barney Frank (centre)

The incoming chair of the influential US House Financial Services Committee has appealed to Federal Reserve chairman Ben Bernanke to avoid rushing through new bank fee rules.

In a letter seen by GFS News, Spencer Bachus suggests that a 9-month timeline stipulated under the Dodd-Frank Act provides too little time for the introduction of regulations on debit card interchange fees and routing.

The Republican Senator, who formally takes up his post next week, claims that the central bank risks drawing up "hastily written rules" which could have negative effects on competition and consumers.

"Given the broad scope of this required rulemaking and the enormity of its potential impact on consumers and merchants alike, we doubt that such an extremely short timeframe will be sufficient to produce thorough and thoughtful final rules that consider the myriad perspectives of all affected parties," Bachus writes.

The direct appeal echoes a separate plea by Bachus to regulators over the "scope and direction" of securities rulemaking and marks a reversal of the attitude of previous committee chair and Dodd-Frank author Barney Frank.


Under section 1075 of Dodd-Frank, the Federal Reserve has until 21 April 2011 to issue three final rules on interchange fees covering debit fee structure, fees for fraud prevention and debit transaction network fees.

The central bank also has until 21 July 2011 to produce new rules on the routing of transactions on payment card networks.

Bachus however argues that Congress devoted "little if any time" to considering the impact of any changes and that there are lingering concerns whether the Fed has had the time needed to address the "intent of the statute".

The Senator, whose letter is dated 17 December and co-signed by fellow Republican congressman Jeb Hensarling, calls on Bernanke to "conduct a judicious review of all the available comments".

"Doing so would allow for the Fed to solicit and consider additional input on these questions, as well as investigate any potential unintended consequences engendered by Section 1075."

Earlier this month, Frank warned that Bachus planned to launch an "assault" on financial regulation.

"The assault he intends to lead against improved financial regulation is based on a seriously flawed view of the relationship that should exist between financial institutions and those who set the rules governing safety and soundness," Frank said.


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