NEW YORK — Now it's the public's turn to give its input on the cost of doing business with debit cards.
At a meeting on Oct. 25, the Federal Reserve Board of Governors voted six to one to open up proposed revisions to Regulation II's Interchange Fee Cap to a 90-day public comment period. Those 90 days will begin once the proposal is published in the Federal Register.
The Federal Reserve set a swipe fee cap in 2011 after it was directed by Congress under the 2010 Durbin Amendment to set regulations for debit card swipe fees, which are also known as interchange fees. Under the current rule, each interchange fee received by a debit card issuer for a debit card transaction can be no more than the sum of 21 cents, the base component; 5 basis points multiplied by the value of the transaction, or the ad valorem component; and fraud-prevention adjustment of 1 cent per transaction.
Under the revisions, the base component cap would decrease to 14.4 cents, the ad valorem component would decrease to 4 basis points; and the fraud-prevention adjustment would increase to 1.3 cents per transaction.
With the three components taken into account, the maximum interchange fee for a $50 debit card transaction will be 17.70 cents down from the current value of 24.50 cents for the same transaction.
As part of the proposal, the cap will be revisited every two years. Any future update to the swipe fee cap would be published without inviting public comment and would be published by March 31 of odd-numbered years, with the new amounts taking effect on July 1 and remaining in effect for two years, according to a memo by the Federal Reserve staff.
Not all board members supported the proposal. Federal Reserve Board Governor Michelle W. Bowman issued a statement against the revisions, noting that "while the proposal suggests that it could result in benefits to consumers, I am concerned that the costs for consumers — through the form of increased costs for banking products and services — will be real, while the benefits to consumers — such as lower prices at merchants — may not be realized."