Wednesday, June 22, 2011

Fed Plans June 29 Meeting on Debit Card Swipe Fees

The Federal Reserve has scheduled a meeting for June 29, 2011 to discuss plans regarding new debit card interchange fee regulation. The "Durbin Amendment" to the Dodd-Frank financial overhaul bill would limit debit card fees to 12 cents per transaction.

The fee plans are important for mobile payments providers to the extent that the new rules will significantly decrease the amount of payment fees a transaction provider can expect to earn, whether conducted using bank cards or some new mobile payment mechanism.

The Fed, at the June 29 meeting, is expected to issue final rules regarding debit card swipe fees, also known as interchange fees, that banks charge retailers every time a consumer swipes a card at the register to make a purchase.

The Fed missed the initial April deadline for finishing debit swipe fee guidelines as mandated by the Dodd-Frank financial overhaul bill. The U.S. Senate also declined to modify the Durbin Amendment earlier in June. See http://blogs.forbes.com/halahtouryalai/2011/06/08/bank-lobbyists-fail-to-delay-durbin-amendment/.

The Fed has proposed two alternatives to debit interchange fee regulation. Both would set a maximum of 12 cents per transaction for debit cards with no apparent distinction between signature and PIN. Under one proposal, there would be a safe harbor of 7 cents, and issuers could make a case for up to 12 cents based on their actual average variable cost of authorization, clearing and settlement. Under the other proposal, issuers would have a cap of 12 cents per transaction.

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