Debit Interchange Fees Capped at 21 Cents-Plus

MARK HAMSTRA

WASHINGTON — The Federal Reserve on Wednesday said the final rule for implementing debit-card interchange fees would cap those fees at 21 cents per transaction plus 0.05% of the transaction amount — nearly double the rate that the Fed had previously proposed.

"The Federal Reserve very clearly did not follow through on the intent of the law," said Mallory Duncan, chairman of the Merchants Payments Coalition, which includes Food Marketing Institute, the National Grocers Association and other retail groups. "This rule is unacceptable to Main Street merchants and consumers, who were counting on the Fed to issue a fair rule that followed Congress' law. Unfortunately, this rule does not meet those qualifications."

In explaining the new rule in a webcast on Wednesday, the board of the Federal Reserve said it received more than 11,000 comments on its proposed rule, which had suggested capping fees at between 7 and 12 cents per transaction. It said it decided to take into account more costs incurred by card issuers than it had originally.

The board also said that studies in other countries showed that capping card fees could reduce the rewards offered to consumers for using the cards, but would not cause a meaningful reduction in the use of the cards. It was unclear whether the reduced costs would be passed on to consumers by merchants, based on those studies.

In addition to the fee cap, the final rule also requires that issuers provide a choice of two unaffiliated processing networks for each transaction.

The new rules on debit interchange fees take effect Oct. 1.