The 21 cent fee cap set on debit interchange fees falls short of what is needed by credit unions to recover all of the costs of offering debit cards, one expert has warned.
The final rule by the Fed on debit interchange fees caps the base fee at 21 cents per transaction. The rule also allows permit issuers to add an additional component equal to 0.05 percent of the value of the transaction, which is meant to offset some of the fraud costs of the institutions.
An interim final rule allows for an additional cent to be charged per transaction if an institution implements certain fraud prevention measures.
“consumers will ultimately pay a higher price for basic financial services because of the limitations this final rule creates," NAFCU President Fred Becker said.
Fed Chairman Ben Bernanke and other regulators have recently expressed doubts over the ability of card issuers to recoup all of their costs and have questioned the likely effectiveness of the small-issuer exemption that excuses those with $10 billion or less in assets from the low fee cap.
“We had hoped that Federal Reserve Chairman Bernanke’s expressed concerns regarding smaller financial institutions would have helped it structure the final rule in a way that affords credit unions greater protection,” Becker said. “Regrettably, it is Main Street and consumers that will pay the price for this Draconian rule.”