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INDUSTRY NEWS - Swipe Fee Reform Delay? No Way!
Debit cards are the No. 1 form of payment in the United States, accounting for nearly 35% of all pay transactions. Whenever a customer uses a debit or credit card, the business pays a fee to the bank called "interchange" to process the transaction.
In December of 2010, the Federal Government announced the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill would essentially "cap" all debit interchange fees at 12 cents per transaction; a near 70% cut from the current average of 44 cents per transaction. The bill was originally set to be finalized in April and would take effect in July offering much needed financial relief for merchants who accept debit cards issued by Visa or MasterCard as a form of payment.
As you would guess, the bill has caused quite an uproar with many financial firms. Banks and debit card issuers oppose the bill, arguing retailers benefit from the debit and credit processing infrastructure that banks set up, and that the cost of maintaining this system is far more than 12 cents per debit transaction, especially when factoring in fraud and security costs.
In support of the opposition, a pair of bills called the Debit Interchange-Fee Study Act was introduced into the U.S. Senate and U.S. House of Representatives requesting that the U.S. Treasury conduct a study to determine how debit interchange regulation will affect consumers and small financial institutions. If it passes it could lead to a 2 year delay on the swipe-fee reform!
However, a letter dated March 29 from U.S. Federal Reserve Chairman, Ben Bernanke, stated that although the reserve would not be able to meet the April deadline for issuing the rules, they still have plans to have the rules issued by July 21, which is when they would go into effect.
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