|
|
Fed Finalizes “Swipe Fee” Limit Rule
The Federal Reserve has finalized a rule implementing a provision of the Dodd-Frank Act calling for limits on “swipe fees,” the fees that debit card networks can charge for processing transactions. The rule also sets limits on network exclusivity arrangements and routing restrictions. The limit will apply only to issuers that have assets of $10 billion or more, when combined with all of their affiliates.
According to the Fed's initial proposal, the average swipe fee currently is 44 cents per transaction; however, based on the Dodd-Frank Act requirement that the fee be “reasonable and proportional to the cost insured by the issuer with respect to the transaction,” the Fed proposed a limit of only 12 cents. Under the final rule, the maximum fee will be 21 cents per transaction plus the product of multiplying the value of the transaction by 5 basis points. According to the Fed, this would result in a swipe fee of about 23 cents on a $39 transaction, which was said to be the average amount of a debit card transaction. The rule does not specify a maximum fee that can be generated by this calculation.
In order to facilitate ongoing compliance with the Dodd-Frank Act requirement, the Fed said that it will annually publish two lists:
-
a list of all issuers that are exempt from the standards because they do not meet the $10 billion threshold; and
-
a list of the average interchange transaction fees each network provides to its covered and exempt issuers.
The agency also issued an interim final rule under which card issuers that implement qualifying fraud-prevention standards will be able to seek permission to charge an extra 1 cent per transaction. If an issuer meets these standards and wishes to receive the adjustment, it must certify its eligibility to receive the adjustment to the payment card networks in which it participates. Comments on the interim final rule are due by Sept. 30, 2011. The fraud-prevention adjustment is effective Oct. 1, 2011, concurrent with the debit card interchange fee limits.
Fed Chairman Ben S. Bernanke called the interchange rulemaking one of the “most challenging” under Dodd-Frank. He said the Fed received input from more than 11,000 commenters on the proposed rule, which the agency reviewed carefully. According the chairman, “Congress has directed the Board to accomplish a very difficult task. I believe the final rule gives careful consideration to the statutory language, the cost data available to us, and the complexities of the debit interchange payment system.”
Vice Chair Janet Yellen added her hope that “the banking industry, the retail industry, and the card networks will work together in a collaborative manner to ensure that the debit card system, and card systems more broadly, are designed in a manner that best balances the needs of all parties.”
Assistant Senate Majority Leader Dick Durbin, D-Ill., expressed support, saying the rules “will finally make swipe fee reform a reality and help bring fairness, transparency and competition to a debit card system that for years has operated without them.” He added, however, that he is disappointed that the Fed “has yielded to the big banks in certain parts of its final rulemaking. The inflated cap and extended delay...will unnecessarily take money out of the pockets of consumers and small businesses and give it to big banks that neither need nor deserve it.”
While asserting his fundamental disagreement with “price fixing by the Fed,” Sen. Bob Corker, R-Tenn., commended the agency, stating “I know the Fed was listening when a majority of the Senate voted to delay and modify the interchange rule and require the Fed to consider the true costs of transactions when crafting their final rule.” He asserted his hope that the “final regulation will allow community banks to continue offering debit card services without unfairly penalizing consumers or hurting their ability to compete for business.”
|
|
Free White Papers |
A Retrospective of the Troubled Asset Relief Program
By Katalina M. Bianco, J.D.
Download
PDF
Credit
Card Reform: An Analysis of the Credit CARD Act
By Katalina M. Bianco, J.D.
Download
PDF
Comparative Analysis of Non-U.S. Bank Regulatory
Reform and Banking Structure
By Gregg D. Killoren, J.D.
Download
PDF
The Cost of FACT Act Compliance: New Research
Study Finds that Financial Institutions Are Underestimating Cost
By Adam Elliott
Download
PDF
Financial Regulation Reform: What to Expect in
the 111th Congress
By James Hamilton
Download
White Paper
The Other Bailout: How the Fed Is Financing the
Financiers, and Related SEC Disclosure
By Mark S. Nelson
Download
White Paper
The Economic Bailout: An Analysis of the Emergency
Economic Stabilization Act
By Katalina M. Bianco and John M. Pachkowski
Download
White Paper |
Product Spotlight
Bankruptcy Law Guide
New
bankruptcy legislative requirements and changing economic
conditions have drastically increased the amount of information
required to handle this costly and uncertain area of law. The Bankruptcy
Law Reporter provides all the most up-to-date
information necessary to navigate the maze of bankruptcy law.
Whether it's simply ensuring your company is on solid legal and
financial ground, settling court disputes or protecting your own
personal interests in a corporate or personal case, the answers
are all here.
More Info...
|
Bank Digest
Bank Digest tracks the latest banking activity, regulatory changes and trends in federal banking policy. Each day, Bank Digest provides both a concise abstract and the full text of that day's releases from the federal agencies that impact the banking industry. Bank Digest also provides additional detail of significant events in weekly and monthly features.
More Info...
|
Consumer Credit Guide
In
the past, many states have attempted to cure problems and abuses
that have appeared on a "one-at-a-time" basis,
resulting in a multiplicity of consumer credit laws. In
addition, the federal government has injected standards into
broad areas of consumer credit previously regulated only by the
states. The CCH Consumer
Credit Guide publishes the information that you need
to succeed in the complex area of state and federal consumer
credit laws and regulations.
More Info...
|
Financial Privacy Law Guide
This product provides comprehensive coverage of federal and state laws, regulations, interpretations and decisions.
The Guide covers data security, insurance and health information privacy, fair credit reporting, bank secrecy, identity
theft, the Gramm-Leach-Bliley Act, the E-Sign Act, the Electronic Fund Transfer Act, the Freedom of Information Act,
the Right to Financial Privacy Act and international privacy.
More Info...
|
State Banking Law Reporter
Expedite your research with the CCH© State Banking Law Reporter. Now there's a single source for state
banking law, giving banking professionals and legal counsel ready access to the information you need. State
Banking Law Reporter combines the full text of state laws and regulations with authoritative explanations and
consistent, topical organization.
More Info...
|
|
|