Joint Letter to the Board Requesting Extension of Reg II Effective Date

Ms. Ann E. Misback
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Dear Ms. Misback:

The American Bankers Association ("ABA"), Consumer Bankers Association ("CBA"), Credit Union National Association ("CUNA"), National Association of Federally-Insured Credit Unions ("NAFCU"), and The Clearing House ("TCH"), which together represent virtually all of the Nation's regulated financial institutions, write to request that the Board of Governors of the Federal Reserve System ("Board") extend the effective date for the recent final rule amending Regulation II (12 C.F.R. Part 235, the "Final Rule"), in order to provide debit card issuers, which are predominantly community banks and credit unions, time to implement the requirements of the Final Rule.

Banks and credit unions of all sizes provide innovative and competitive payments products and services to consumers and commercial customers. Unique to the American market, thousands of regulated financial institutions form a large and diverse network of payments providers that originate and receive funds. Financial institutions provide these payment services using a variety of technologies and vendors within product systems that are interrelated and often complex.

Accordingly, we remain concerned, as articulated in our prior comment letters and those from financial institutions, that the new mandate imposed by the Final Rule provides debit card issuers, including thousands of community banks and credit unions, with insufficient time to undertake time-consuming and resource-intensive efforts to change their core banking software and payments infrastructure. In many cases, these will include selecting, contracting with, onboarding, and testing potential vendor solutions while prudently managing operational and security risks. The rushed timeline for these efforts will create unintentional negative consequences for consumers while banks and credit unions are forced to reprioritize implementation of the Final Rule over other consumer-oriented and security-focused improvements.

The Final Rule's effective date of July 1, 2023 ("Effective Date") fails to take into consideration the implementation obstacles facing small issuers and the impact on community banks and credit unions, which will be forced to rush implementation in a way that could jeopardize the safety and soundness of the implementation process and compromise the integrity and reliability of the ultimate result. As such, we respectfully request that the Board extend the Effective Date one and a half years, to January 1, 2025, in order to protect consumers and the integrity of the U.S. payments system.

We acknowledge Governor Bowman's dissent to the passage of the Final Rule, and we affirm the concerns she raised in her statement.

Download the comment letter to read the full text.