Fed Says No Plans to Alter Debit Interchange Limits (March 11, 2013)
March 11, 2013
The Federal Reserve Board last week said it has no plans to change its regulations on debit card interchange fee limits, despite outcry from retail and consumer groups that claim the limits are currently too high. The Fed issued its second biennial report on the debit card market—as required by Dodd-Frank—which surveyed card networks and 131 debit issuers and covered 2011. Debit interchange fees declined by an average of 18 cents per transaction after the Oct. 1 implementation of the fee limits instituted following the Durbin Amendment, the report said. However, the Fed’s report revealed that the fees being charged were still much higher than the average transaction processing cost to an issuer, with large issuers, in particular, reaping profits of up to 500 percent per transaction.
Under the Fed’s debit interchange fee limits, issuing banks with more than $10 billion in assets are barred from charging more than 21 cents, plus 0.05 percent of the cost of a debit card purchase and 1 cent to offset the cost of fraud prevention. Overall, the Fed says the fee works out to an average of 24 cents per transaction for the biggest issuers. However, the average cost to an issuer for authorization, clearing and settlement of a transaction is less than 5 cents for the biggest banks, whose high transaction volume keeps such costs low, according to the survey data.
Still the Fed said in its report that it has no plans to propose changes to the interchange limits set post-Durbin, drawing renewed ire from retail and consumer groups, including the National Association of Convenience Stores, the National Retail Federation and the Food Marketing Institute. In late 2011, those were among the groups that filed suit against the Federal Reserve Board when it raised its debit interchange fee cap from 12 cents—as initially proposed—to the current level.
