WASHINGTON — The Federal Reserve next week will hold a meeting to vote on revising the fee that merchants pay to banks when customers shop with debit cards, the central bank said Tuesday.
While the Fed did not specify whether it would lower or raise the fee, experts anticipate that the central bank will cut it by around 10-20%. That's because the cost of computing power has fallen since the Fed set the rate more than a decade ago, and because of the advent of chip-based debit cards, said Jaret Seiberg, a financial services analyst for Cowen Washington Research Group.
The move from the Fed is somewhat delayed, Seiberg said in a note.
"The Fed was expected in late 2022 or early 2023 to re-examine debit interchange pricing," he said. "We believe that got pushed to late October thanks to the regional bank troubles in the spring."
Currently, merchants pay card issuers 21 cents and 0.05 percent of the transaction value, a rate that was set pursuant to a section in the 2010 Dodd-Frank law called the Durbin Amendment, which requires the central bank to set that rate for banks with at least $10 billion of assets. The Fed, at their meeting next week, will likely start a rulemaking process that will include a public-comment period, at which point credit card issuers and merchants will have the opportunity to weigh in.
"We'd expect that process to take 9-12 months, and any final rule is likely to be challenged immediately by the issuers in order to delay implementation," said Jeffries analysts in a note. "The prospect of a legal fight after any published rulemaking leads us to believe that any proposed change is unlikely to be implemented within the next two years."
Interchange fees, or swipe fees, have been the subject of much debate and lobbying in Washington in the last few years.
Sen. Dick Durbin, D-Ill., who gave his name to the Durbin Amendment during the writing of Dodd-Frank, has tried to move forward the Credit Card Competition Act, which would require cards from banks with $100 billion or more of assets to offer merchants the choice of two unaffiliated card networks that aren't both Visa and Mastercard. While the bill's sponsors say it will lower fees and promote competition outside of the "Visa-Mastercard duopoly," advocates for the financial services industry say it's a giveaway to retailers and would increase costs for consumers.
While that bill is
Last month, the
"Congress told banks a dozen years ago that debit card swipe fees should be 'reasonable and proportional' but they've never been either," said National Retail Federation Chief Administrative Officer and General Counsel Stephanie Martz. "It's time to set the cap that Congress intended and recognize that banks' costs to process transactions have dropped significantly. Doing so would reduce costs for retailers and give them more savings to share with their customers by holding down prices in a time of inflation. These fees have been too high for too long and we're glad to see the Fed is finally ready to act."
