Federal Reserve Seeks Input in Latest Swipe-Fee Proposal

Board proposes 17.7-cent cap to be reviewed every 2 years
swipe debit card
Photograph: Shutterstock

The Federal Reserve Board on Wednesday requested comment on a proposal to lower the maximum interchange fee that a large debit-card issuer can receive for a debit-card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward.

By law, the board is required to establish standards for assessing whether an interchange fee received by a large debit-card issuer for processing a transaction is reasonable and proportional to certain issuer costs. The board first implemented this statutory requirement in 2011, setting an interchange-fee cap for debit-card issuers with $10 billion or more in assets.

The proposal would adjust the interchange fee cap to reflect changes in issuer costs since the rule first took effect. For example, the cap on an average-sized $50 debit-card transaction would decline from 24.5 cents under the current rule to 17.7 cents under the proposal. In addition, the proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the board from large debit card issuers.

The National Retail Federation said the lower cap “is a welcome move but still leaves the fees significantly higher than banks’ cost to process the transactions.”

“This is a significant reduction that will save money for retailers and their customers, and we welcome the progress that has been made,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “Nonetheless, it still doesn’t get to the ‘reasonable’ level Congress sought and it isn’t proportional to banks’ falling costs.

“The Fed needs to meet that goal, and particularly needs to consider that a larger share of fraud costs has shifted from banks to merchants since the cap was established. Main Street merchants and American families have paid billions of dollars too much and want the Fed to do what Congress intended a dozen years ago.”

The proposal is now subject to public comments for 90 days and must be approved by the board before becoming final.

The Federal Reserve Board also approved the release of the latest biennial report detailing data collected from large debit-card issuers on interchange fees, issuer costs and fraud related to debit-card transactions in 2021.

Based in Washington, D.C., the National Retail Federation advocates for the people, brands, policies and ideas that help retail succeed.

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