Neither banks nor merchants are pleased with the Federal Reserve's final rule on debit cards.
Bank executives have criticized the price controls in the rule and are warning that exemptions for small banks won't work in practice, Digital Transactions reports. Retailer organizations, however, are branding the final rule as "irresponsible" and too far removed from Congress' original intent.
The final rule on the Durbin Amendment, which is part of the 2010 Dodd-Frank Act, followed seven months of comment and debate following the December issuance of the proposed rule.
As part of Wednesday's final rule, issuers who hold more than $10 billion in assets are limited to 21 cents, plus 0.05 percent in interchange, on debit card transactions. The Fed had originally planned on capping the interchange at 12 cents, or 73 percent lower than the 44 cent average. The final rule, however, caps the interchange at 40 percent of the 44 cent average, Digital Transactions reports. It also allows for large banks to collect an additional penny per transaction to recover certain fraud prevention costs.
Issuers are also ordered by the final rule to support at least two unaffiliated debit networks.
“It’s still a price-fixing situation, but we’re stuck with it because that’s what Congress told the Fed to do,” Bob Steen, the chairman of Bridge Community Bank in Mechanicsville, Iowa, told Digital Transactions.