The Federal Reserve yesterday issued its final rule on debit card interchange fees, setting them at 21 cents per transaction. The Fed’s decision on the rule, which was mandated by the Dodd-Frank Act, followed the review of more than 11,000 comments on the matter.
The fee is significantly higher than the proposed 12-cent cap that the Fed announced back in December. That initial cap sent banks into an uproar. Under the final rule, banks are permitted to charge slightly more if they take steps to avoid fraud. “When combined with the maximum permissible interchange fee under the interchange fee standards, a covered issuer eligible for the fraud-prevention adjustment could receive an interchange fee of up to approximately 24 cents for the average debit card transaction, which is valued at $38,” the Fed said in a statement.
Though the 21-cent fee is a sharp change from the current average of 44 cents per transaction, many retailers are unhappy with the decision and feel that the Fed caved under pressure from the banks.
“American consumers suffered a major loss today,” said Matthew Shay, President and CEO of the National Retail Federation. “We are extremely disappointed that the Federal Reserve chose to be influenced by special interests and ignored the will of Congress and American consumers. While the rate will provide modest relief, it does not go far enough.”
Sen. Dick Durbin (D-IL) was slightly more positive about the ruling, saying in a statement that the rules would give retailers some relief from the “unreasonably high fees” that Visa and MasterCard charge and will also benefit consumers. However, he also expressed disappointment “that the Federal Reserve has yielded to the big banks in certain parts of its final rulemaking. The inflated cap and extended delay that the Fed announced today 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.”
The Fed is accepting comments on its decision through September 30. The rule, originally slated for July 21, will go into effect on October 1.