Bankers fighting against a proposed cap on the “interchange” fees they charge retailers on debit-card transactions appear to have gained some ground, with major regulators criticizing elements of the proposal.
Under the Dodd-Frank financial reform act approved in July, the Federal Reserve must estabish a cap on the per-transaction fee banks may charge merchants who accept debit cards. In December, the central bank indicated it wanted the fee to be 12 cents.
Banks have criticized that charge as too small. Retailers groups, on the other hand, have cheered it.
Regulators appearing before two congressional hearings yesterday appeared to try to split the difference: without criticizing the essence of the proposal, they said it was not yet ready for prime time and would benefit from more study. In other words: they want to slow it down.
According to Bloomberg News, Federal Reserve Chairman Ben Bernanke, for example, said the Fed was still thinking about a “carve out” that would exempt small lenders from portions of the new restriction. Fed governor Sarah Bloom Raskin and Federal Deposit Insurance Corp. Chairman Sheila Bair were similarly tepid, with Bair saying “some policy issues ... could be thought through a little more.”
The comment period for the propsal ends next week. The Fed is required to finish its deliberations on the cap by April 21, which would go into effect on July 21.
Investors have shared financial industry concerns that the interchange fee as proposed will slash into a lucrative source of revenue, marking down share of Visa Inc. and MasterCard Inc. down by more than 10 percent the day the Fed’s proposals were first released.