The Federal Reserve on Thursday proposed limiting fees for processing debit cards transactions, which would result in lower costs for businesses.
Currently set at 1 to 2 percent of a transaction’s sum, the fee is passed on to consumers by being built into the price of merchandise, costing families an extra $427 on average each year, estimates the National Retail Federation (NRF).
“These regulations are a significant step toward reining in credit card industry fees that have driven up prices for consumers for far too long, but we still believe debit card transactions should be honored at face value the same as checks,” said NRF senior vice president Mallory Duncan in a statement.
“Debit cards are merely plastic checks that draw from the same bank accounts as paper checks, and there’s no reason they should be treated any differently,” Duncan added. “We will work closely with the Fed as these regulations are finalized to ensure that the reduction in fees – and the amount of money retailers can offer customers as a discount – is maximized.”
A Congressional order required the Federal Reserve to analyze whether current fees are excessive and then set a reasonable new standard. The agency discovered the fees totaled more than $16 billion in the U.S. in 2009.
Aside from changing fee standards, the Federal Reserve’s proposal also would prohibit all issuers and networks from restricting the number of networks over which debit card transactions may be processed.
“As background to this proposal, it is important to note the prominent role debit cards now play in our payments system,” said Janet Yellen, vice chair of the Board of Governors of the Federal Reserve. “The results of a new Federal Reserve survey published earlier this month show that nearly 38 billion debit card payments were made in the U.S. in 2009. Debit cards are now used in 35 percent of non-cash payment transactions and have eclipsed checks as the most frequently used non-cash payment method.”
The public has until February of next year to comment on the proposal. The Federal Reserve will reveal a final version of the rules in April before the regulations take effect in July.
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