The Federal Reserve Board of Governors will meet on June 29 to finalize a rule that caps the amount banks can charge merchants for each time a debit card is used.
The rule was a hotly contested provision in last year’s Dodd-Frank consumer protection and Wall Street reform law known as the Durbin Amendment, according to ChicagoTribune.com. It allows the Fed to set price controls for interchange fees, which currently cost merchants 44 cents per transaction.
The Durbin Amendment caps the amount at 12 cents and is expected to cost banks about $12 billion annually. Banks and card network companies have been aggressively pushing the Fed to raise the proposed cap.
According to banking groups, the 12 cent fee would not cover costs necessary to carry out individual transactions or cover fraud losses, ChicagoTribune.com reports.
The American Bankers Association has asked the Fed to raise the proposed cap to compensate transaction costs and incentivize investments in efforts that protect consumers, enhance security and maintain market confidence in the payments system.
Analysts are speculating on a range of estimates that the Fed could boost the cap, from 14 cents to 20 cents, or not a raise at all, according to ChicagoTribune.com.
Once the Fed announces the decision, banks will have little time to adapt it. Under the Dodd-Frank law, the rule is supposed to go into effect on July 21.