Friday, July 01, 2011
In a battle of retailers vs. banks, retailers claimed victory after the Federal Reserve approved drastically lower debit-card fees charged by financial institutions.
The banking industry has been making $20 billion annually off merchants who allow customers to use debit cards for goods and services. The fees have averaged 44 cents per transaction. But under the new federal regulations, such fees will be capped at 21 to 24 cents for each purchase.
Banks can take solace in knowing they kept things from being worse: the Fed had wanted to set the limit at 12 cents.
The cap on fees was mandated in the 2010 Dodd-Frank financial regulation law, but a bill sponsored by Sen. John Tester (D-Montana) earlier in June would have delayed its implementation. A furious lobbying campaign showered legislators with money and attention, but it lost in a close vote. Tester collected nearly $60,000 in contributions from credit card companies and other opponents of the legislation within 17 days of introducing his amendment. Tester is a member of the Senate Banking Committee.
Merchants have said they were passing on the cost of the rising debit-card fees by upping retail prices to customers. But capping of the fees may not save consumers any money. Banks are now saying they plan to increase other fees to make up whatever they lose from charging lower debit-card fees.
Not all banks are being ordered to abide by the new cap. Smaller banks with less than $10 billion in assets were given an exemption by the Fed.
The new rules go into effect on October 1.
-Noel Brinkerhoff, Ken Broder
Fed Halves Debit Card Bank Fees (by Edward Wyatt, New York Times)
Swipe Fee Reform: Banks Lose, Merchants Prevail in Senate Vote (Huffington Post)
U.S. Merchant Fees Higher than Those in Other Nations (by Meg G., Merchant Account Guide)
Swipe-Fee Opponents Shower Sen. Tester with Campaign Contributions (by Alexander Bolton, The Hill)
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