The Bulletin: The OCC Just Locked In Interchange Fees and Merchants Missed It

The Office of the Comptroller of the Currency just removed a layer of legal risk from interchange fees, and most small-business owners who run card transactions have no idea it happened.

The OCC published an interim final rule April 29 clarifying that national banks' power to charge non-interest fees includes interchange fees from credit and debit card operations, even when those fees are set in consultation with third parties like payment networks. The rule took effect immediately. If you're a merchant negotiating processing agreements or a card-issuing bank with exposure to interchange litigation, the ground under you shifted this week. The OCC framed it as a "clarification," but the timing (an interim final rule that skips the usual notice-and-comment delay) signals the agency wanted this in place now.

The week, in three lines.

OCC interim final rule on national bank interchange fees took effect April 29

Community Bank Leverage Ratio requirement lowered from 9% to 8%

Treasury's dyed fuel refund guidance now live for terminal withdrawals

Interchange fees just got harder to litigate

The OCC's move matters because it pre-empts a category of state-law challenges to how card networks and issuing banks set interchange. The preamble doesn't spell this out, but the implication is clear: if a national bank's power to charge fees includes fees negotiated with Visa or Mastercard, then state attorneys general or private plaintiffs trying to argue those fees violate state consumer protection or antitrust laws will hit a wall of federal preemption.

The backstory. Interchange (the fee a merchant's bank pays to a cardholder's bank every time you swipe) has been litigated for decades. Merchants argue it's a hidden tax set by a cartel; card networks say it funds fraud protection and rewards programs. The OCC historically stayed out of the pricing debate, but this rule anchors interchange squarely within national banks' federally granted powers under 12 U.S.C. 24(Seventh). That matters because federal banking law preempts conflicting state law.

What it means for a small-business owner. If you accept cards, you're paying interchange, and you've probably noticed processors use it as a floor they build their markup on top of. This rule doesn't cap interchange (Congress would have to do that) but it does insulate the current structure from state-level legal disruption. Merchants hoping a wave of state cases might force networks to lower fees should adjust expectations. The clearer path now is negotiating better processor contracts, not waiting for litigation to move the needle. Card-issuing community banks, meanwhile, gained certainty that their interchange revenue won't face a patchwork of state challenges.

The OCC framed it as a "clarification," but the timing (an interim final rule that skips the usual notice-and-comment delay) signals the agency wanted this in place now. From the preamble: "National banks' authority to charge non-interest fees includes fees that are established in consultation with third parties, provided the bank retains the discretion to accept or reject such fees." That sentence does two things: it anchors interchange within the bank's federal powers, and it pre-empts the argument that network-set fees aren't the bank's own pricing decision.

The next domino. Public comment on the interim final rule closes 60 days after publication, around late June. If merchants or state regulators file substantive objections, the OCC could revise or withdraw, but interim final rules rarely get pulled. More likely, this becomes the foundation for the next interchange fight, which will be federal: either Congress legislates caps (unlikely in a divided environment) or the Federal Reserve revisits Durbin Act debit interchange caps under pressure from retailers. For now, the OCC handed card networks a procedural win.

The interchange rule isn't the only banking change that landed this week. The federal banking agencies also lowered the community bank leverage ratio from 9% to 8%, extending how long smaller institutions can use the simplified capital framework without tripping out of it. For a Main Street bank with $10 billion or less in assets, that's breathing room. But the rule also reshapes how banks model capital under stress: a institution that previously maintained a 9.5% buffer to avoid dropping out can now run closer to 8%, freeing up capital for loan growth or dividend payments. The trade is flexibility today for lock-in tomorrow. Once you optimize around 8%, exiting the CBLR to pursue riskier assets becomes harder because you'd need to build Basel III infrastructure from scratch. Watch for banks that stayed out of the CBLR at 9% to opt in now, and for examiners to start asking why a bank at 8.2% isn't holding more buffer.

The community bank leverage ratio just got easier to stay inside

The OCC, Federal Reserve, and FDIC finalized a rule April 29 lowering the community bank leverage ratio requirement from 9 percent to 8 percent and extending the grace period for banks that temporarily fall below the threshold. The CBLR is an opt-in framework: if your bank qualifies, you can skip the Basel III risk-weighted capital calculations and instead meet a single leverage ratio. Most community banks under $10 billion in assets use it because it cuts compliance cost.

The change in practice. Under the old rule, a bank had to maintain a 9 percent leverage ratio to stay in the framework. If you dipped to 8.9 percent, you had two quarters to get back above 9 percent or you fell out and had to calculate risk-weighted assets again. The new rule lowers the floor to 8 percent and gives you four quarters to recover if you fall below 8 percent but stay above 7 percent. If you're between 7 and 8 percent for four consecutive quarters, you drop out of the CBLR and revert to the standard capital rules.

Why it matters: a bank that takes a one-time loss (a commercial real estate writedown, a cybersecurity remediation expense) can now absorb it without immediately losing access to simplified reporting. The four-quarter grace period also smooths out seasonal swings for agricultural lenders or banks in markets with volatile deposit flows. The agencies estimate this will keep roughly 4,800 institutions in the CBLR framework who might otherwise have cycled in and out, which saves each of them tens of thousands of dollars in annual compliance work.

Who's affected. If you're a director or executive at a community bank, this is a board-level conversation: do you stay in the CBLR or revert to risk-weighted capital to optimize for growth? The lower threshold makes the CBLR stickier, but it also locks you out of certain activities. You can't hold more than 25 percent of your assets in mortgage servicing or have significant off-balance-sheet exposure. For banks eyeing expansion into commercial lending or considering an acquisition, the CBLR may now be too constraining even at 8 percent. For steady-state community banks, though, this is a clear win.

What to watch. The rule took effect April 29. Banks already in the CBLR framework don't need to do anything. The lower threshold applies automatically. Banks that previously opted out because 9 percent was too tight should revisit the math. The agencies also clarified that holding companies can use the CBLR if their subsidiary banks do, which simplifies consolidated reporting for one-bank holding companies. This is the kind of rule that doesn't make headlines but changes how thousands of institutions manage capital planning for the next five years.

Treasury closed a dyed fuel refund loophole you didn't know was open

The Treasury Department finalized temporary regulations May 1 governing who can claim refunds for previously taxed dyed fuel withdrawn from a terminal. If you run a heating oil distributor, a farm diesel supplier, or a marine fuel business, these rules dictate whether you can recover the federal excise tax you paid when fuel was dyed for off-road use and then later withdrawn for a taxable purpose.

The setup. Dyed diesel and kerosene are tax-exempt when sold for off-road use: home heating, farm equipment, marine vessels in certain cases. But if dyed fuel gets withdrawn from a terminal and sold into a taxable use (like over-the-road trucking), the tax is owed. The question the temporary regulations answer is: who gets the refund of the tax that was already paid on that fuel before it was dyed?

The rule establishes that only the registered terminal operator or the person who physically withdrew the fuel can claim the Section 6435 payment (the statutory refund mechanism). If you're a distributor buying dyed fuel in bulk and later selling a portion of it for a taxable use, you can't claim the refund unless you meet the registration and procedural requirements, which include filing an updated Schedule C with your excise tax return and maintaining detailed records of the withdrawal, the prior tax payment, and the subsequent sale.

Why this showed up now. The Inflation Reduction Act and subsequent energy tax legislation created new refund pathways for renewable diesel and biodiesel blended with dyed fuel, which opened the door to double-dipping: claiming both the blending credit and the refund for previously taxed fuel. Treasury wrote these temporary regulations to close that gap and clarify that you can't claim a Section 6435 payment if you've already claimed another credit or refund for the same gallons.

What it means in practice. If you operate a fuel terminal or a bulk plant that handles dyed diesel, you need to track which batches were previously taxed, when they were dyed, and when they were withdrawn. The record-keeping burden is non-trivial: the rule requires you to maintain contemporaneous documentation of the fuel's tax status at every transfer point. Small distributors that don't have automated inventory tracking will need to upgrade their systems or hire a tax advisor to ensure they're not leaving refund money on the table or, worse, claiming refunds they're not entitled to and triggering an IRS audit.

The IRS is building out a registration system for terminal operators, and getting registered early will matter when the first refund claims come due. The enforcement angle: IRS audits of fuel excise tax refunds have historically targeted record-keeping failures, not fraud. If you claim a Section 6435 payment without the required Schedule C documentation or without tracking the fuel's prior tax status, expect the IRS to disallow the refund and assess penalties for erroneous claims. Small distributors handling under 500,000 gallons annually are the highest audit risk because they often lack automated inventory systems. The safe play is to register as a terminal operator even if you're not required to, document every dyed fuel withdrawal with a timestamped inventory log, and consult a fuel tax specialist before filing your first refund claim.

The comment period on the proposed version of this rule (published the same day as the temporary rule) is open now. If you're in the fuel distribution business, particularly if you handle both dyed and clear fuel, this is worth a close read. The IRS is building out a registration system for terminal operators, and getting registered early will matter when the first refund claims come due.

State by state

New York moved on foster care permanency planning and employee benefits this week. The Office of Children and Family Services proposed rules (CFS-46-25-00014) tightening diligence requirements for youth in foster care, with clearer permanency timelines that will affect how county social services departments allocate casework hours. Separately, the Department of Civil Service increased annual family sick leave for management/confidential employees from 25 to 30 days (CVS-06-26-00007), a benefit expansion that will ripple through state agencies and any municipality that follows state M/C salary schedules. If you run HR for a New York county or a state contractor with M/C employees, budget for the incremental PTO liability.

Ohio's Public Utilities Commission proposed two rules (4901:1-10-36, 4901:1-10-37) creating an expedited pathway for large commercial customers to return to standard service offer electricity rates after opting into competitive supply. The rules respond to volatility in the wholesale power market that left some manufacturers exposed when their fixed-price contracts expired. If you're an Ohio-based industrial customer currently on a competitive electric contract, the new return pathway gives you an exit if your supplier's renewal pricing becomes uneconomical. Watch for the comment period. Utilities will push back on the expedited timeline because it shifts re-entry risk onto ratepayers.

Texas regulators finalized three fire safety training mandates that take effect in phases over the next three years. All firefighters must now complete cancer awareness training (2 hours every 5 years), traffic incident management training (4 hours every 5 years), and the National Fallen Firefighters Foundation's safety course (4 hours every 5 years). Volunteer departments have until 2029 to achieve full compliance, but paid departments must hit the marks by 2027. If you're a Texas city with a municipal fire department, budget for the training hours and the continuing education tracking systems to prove compliance during inspections.

What's binding this week

May 1. OCC interim final rule on national bank interchange fees takes effect. Card-issuing banks and merchants negotiating processing agreements should review.
May 1. Treasury temporary regulations on dyed fuel refunds take effect. Terminal operators and fuel distributors should update compliance procedures.
May 15. EPA comment window closes on ethylene oxide sterilization facility reconsideration (extended from May 1). Sterilization facilities have until then to file.
June 28. Public comment closes on OCC interchange clarification. Merchants opposing the rule have until then to file.
June 30. Comment period closes on Treasury dyed fuel refund proposed rule. Fuel distributors should weigh in on procedural requirements.

The bottom line

The OCC's interchange move and the community bank capital rule are both bets on stability over disruption: keeping the current structure in place rather than opening it up for renegotiation. Expect the next 60 days to surface whether merchants and state regulators think that's the right call. If you run a business that touches card payments or fuel distribution, the procedural windows closing this spring are the last chance to shape how these rules land. Forward this to your CFO or your compliance lead. These are the details that compound.

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