Bloomberg reports that the Federal Reserve is "proposing lower caps on the fees banks and payment companies can charge merchants when consumers swipe their debit cards at checkout.
"The cap on those fees would be cut about 28% to 14.4 cents per transaction plus 0.04% of the transaction amount under a plan that the Federal Reserve’s board of governors proposed Wednesday. The current limit is 21 cents per transaction plus 0.05%, a maximum set more than a decade ago. The fraud-prevention adjustment would increase to 1.3 cents from 1 cent under the changes, which are subject to a 90-day public comment period."
“Retailers welcome the Fed’s action’s today in proposing to lower the interchange rate on debit transactions,” the Retail Industry Leaders Association, a trade group, said in a statement Wednesday. “As the rule-making process unfolds, the retail industry will continue working with the Fed and will submit comments advocating that the rate should be set even lower.”
Leslie G. Sarasin, president/CEO of FMI-The Food Industry Association, also released a statement:
“The Federal Reserve’s decision today in response to FMI’s petition is a good first step and is the first time that an adjustment to the regulated rate has been proposed since the implementation of the Dodd-Frank Act in 2011. We also welcome the Board of Governors’ proposal that we recommended in our petition to establish an automatic adjustment every two years based on a transparent, predictable formula grounded in data.
“However, while we appreciate the Board of Governors’ proposal to reduce the regulated rate compared to what merchants and consumers pay today – which are initiated by the largest banks who collectively set rates – the proposed maximum rate of up to 17.7 cents put forth by the Board does little to ease the economic burden on merchants and further shifts fraud prevention costs onto retailers. Simply put, merchants who have installed Visa- and Mastercard-required PCI equipment and have fraud liability should not also be required to pay an increase in the fraud adjustment, as proposed by the Board of Governors."
- KC's View:
Expect Visa and Mastercard to rollout the lobbyists and open up the vault to fight this thing.
It isn't a good week for these companies. Bloomberg notes that "payment companies are also facing scrutiny over the fees they charge consumers for credit cards. On Wednesday, the Consumer Financial Protection Bureau released a report to Congress showing that credit-card issuers charged consumers more than $25 billion in fees and more than $105 billion in interest in 2022."