Federal Reserve Proposes Cap On Debit Card Fees

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Federal Reserve Proposes Cap On Debit Card Fees


"To be successful in this business you have to like people. We can build small store formats, but the magic is in how you run them."

Hank Armour, NACS, page 41

For 2011, the price per gallon for gasoline is forecasted to increase to an average of $3.04, while diesel is forecasted to reach an average of $3.22.

Source: CSNews 2011 Industry Forecast Study

The proposal also calls for comment on requiring debit cards to offer multiple networks

A new Federal Reserve proposal would cap debit card fees retailers can charge customers at 12 cents per transaction. The news spurred mixed results: NACS called the proposal "a positive step" but shares of credit card companies took a tumble, with Visa closing down 12.7 percent and MasterCard closing down 10.3 percent on Dec. 16, the day the proposal was released.

According to Reuters, the Federal Reserve put the average interchange fees for all debit transactions in 2009 at 44 cents per transaction. The proposal also calls for comment on requiring debit cards to offer multiple networks, which will allow the same debit card to be processed over Visa, MasterCard or rival payment networks like NYCE.

The Federal Reserve has set a 60-day comment period on the proposal. It is required by the Dodd-Frank financial industry reforms signed into law in July to put out a final rule on the fees by April 21, and it could become effective in July, Reuters reported.

The Dec. 16 proposal was met with optimism from NACS, which called it a "positive step." However, the association holds firm that there should not be any interchange fees on debit transactions, bringing it on an even keel with checks.

"The proposed rules are a positive step in addressing the anti-competitive behavior of the banks and credit card companies and an acknowledgement of the voice of American small businesses and consumers," NACS president and CE Hank Armour said. "This is what 5.4 million of our customers had in mind when they signed petitions demanding reform."

In June, NACS delivered to Congress a petition containing two million signatures the association collected at c-store across the country. This petition was in addition to the 1.7 million signatures collected by 7-Eleven, which were delivered to Congress in 2009, and 1.7 million signatures collected by Speedway SuperAmerica, delivered in early 2010.

"[The] proposed rulemaking by the Federal Reserve begins to create a system in which debit swipe fees are reasonable and proportional to the processing costs," Armour added.

Broken down by numbers, swipe fees have been the second largest expense item — with labor costs coming in first — for retailers for several years, according to NACS. As a percentage of overall sales, card fees rose in 2009, increasing from 1.35 to 1.45 percent of total industry sales dollars, factoring in all forms of payment.