This story appeared in Bank Digest.
The Federal Reserve has finalized a rule implementing a provision of the Dodd-Frank Act calling for limits on “swipe fees,” the fees that debit card networks can charge for processing transactions. The rule also sets limits on network exclusivity arrangements and routing restrictions. The limit will apply only to issuers that have assets of $10 billion or more, when combined with all of their affiliates.
According to the Fed's initial proposal, the average swipe fee currently is 44 cents per transaction; however, based on the Dodd-Frank Act requirement that the fee be “reasonable and proportional to the cost insured by the issuer with respect to the transaction,” the Fed proposed a limit of only 12 cents. Under the final rule, the maximum fee will be 21 cents per transaction plus the product of multiplying the value of the transaction by 5 basis points. According to the Fed, this would result in a swipe fee of about 23 cents on a $39 transaction, which was said to be the average amount of a debit card transaction. The rule does not specify a maximum fee that can be generated by this calculation.