Big banks relieved as Fed sets debit card rule

The Federal Reserve handed a partial victory to Wall Street on bank card fees © AFP/Getty Images/File Spencer Platt

AFP

WASHINGTON (AFP) – The Federal Reserve on Wednesday slashed the fees which banks charge for debit card transactions, but did not cut them as deeply as initially expected, handing a partial victory to Wall Street.

Under the new rules, the fee charged for the average debit card transaction of $38 would be capped at approximately 24 cents, the Fed said in a statement announcing its decision.

Currently, the fee for an average debit card transaction is 44 cents. Banks had feared that the average fee would be cut as low as seven to 12 cents and mounted a fierce lobbying campaign to thwart the changes.

The rule change was mandated by last year’s Dodd-Frank financial reform law, which brought in tougher regulation of the US banking system in an effort to prevent a repeat of the 2008 financial crisis.

Lawmakers from President Barack Obama’s Democratic Party had pushed for the debit card provision to help retailers and small businesses, which pay the transaction fees. The fees are typically not seen by consumers.

The American Bankers Association, which lobbies for the interests of large banks, welcomed the Fed’s decision on Wednesday.

“The Federal Reserve has taken a significant step in reducing the harm that could have resulted from the proposed rule,” it said in a statement.

Shares of companies which process debit card payments surged after the Fed’s decision was announced, with Visa stock skyrocketing by 15.0 percent and Mastercard rising 11.3 percent.

© AFP — Published at Activist Post with license