Fed Approves Revised Swipe Fee Plan

The Federal Reserve Board yesterday approved a revised plan on debit interchange fees. After months of waiting and hard fought legislative and regulatory battles, yesterday the Fed revised plan moves from a flat 12 cent cap to a 21 cent fee with a 1 cent fraud-prevention fee and a .05 percent “ad valorem” fee to account for fraud-related losses.    

“The proposed move shows a measured response to the commentary received, but credit unions still expect efforts to provide meaningful protections for small issuers that is promised in the Durbin Amendment to the Dodd-Frank bill,” said Northwest Credit Union Association (NWCUA) CEO John Annaloro. “If the industry average transaction cost is documented at 44 cents, government price controls that set the fee at below-cost levels is wrong in concept, and the amount is immaterial,”

“We applaud the Federal Reserve for increasing the cap, but our concern remains that the cap isn’t good for consumers or credit unions,” said NWCUA President Troy Stang.  “In light of recent breaches such as those to debit cards used at Michaels’ stores, we know the average fraud costs aren’t going to go down.” 

After receiving over 11,500 comment letters on the initial proposal—with nearly half being from credit unions— Federal Reserve Board staff was charged with drafting a new proposed rule, taking into account the broad feedback.  Concerns remain, however, around the viability of a two-tier system and whether or not the small issuer exemption would have teeth enough for enforcement. 

With the rule originally scheduled for implementation July 21, 2011, issuers expressed concern about the ability to implement any changes the Board would make.  Because of the delay in providing a revised proposal the implementation date has been moved to October 1, 2011.

“The additional time to comply with the rule is appreciated, but the new October 1st deadline is still too soon.  The Northwest Credit Union Association will study the draft final rule and comment as appropriate,” said Annaloro. “The bottom line is that for credit unions, 12 cents was too low, and 21 cents is still inappropriate.”

The new fee schedule is delayed until October.

Posted in Federal.