Federal Reserve Raises Swipe Fee Cap In Victory For Wall Street

[WillyT]

Federal Reserve Raises Swipe Fee Cap In Victory For Wall Street
Zach Carter - HuffPo
First Posted: 06/29/11 06:36 PM ET Updated: 06/29/11 09:52 PM ET

<snip>

WASHINGTON -- The Federal Reserve delivered the punchline Wednesday to the year-long joke that has been the lobbying blitz over debit card swipe fees. Amid heavy Wall Street pressure, the Fed nearly doubled the amount it will allow banks to charge retailers and consumers under a new regulation while effectively exempting an entire class of debit card transactions from the rule altogether.

The swipe fee debate dominated the Senate for months, as nearly the entire U.S. retail industry battled banks in Capitol Hill backrooms. Last year's Wall Street reform bill required the Fed to write a rule capping swipe fees on debit cards, which banks charge retailers for the privilege of accepting plastic.

The central bank initially proposed a 12-cent limit on those fees in December, following a Fed survey of banks that found that the median cost of processing a debit card transaction was 7 cents, with an average cost per swipe of 4 cents. The 12-cent cap would have left banks with a profit margin of about 70 percent on debit cards based on the median cost, but represented a reduction of almost 75 percent from the current average swipe fee of 44 cents per transaction.

Wall Street has been pressuring the Fed all year to reconsider the rule, and on Wednesday, that pressure paid off: The central bank raised its proposed cap on swipe fees to 21 cents, plus 0.05 percent of the transaction amount and 1 cent to cover the costs of protecting against fraud. All told, the Fed said it will allow banks to charge a maximum of 24 cents per transaction, on average.

That's actually higher than the current average amount that retailers pay for swipes that require customers to enter a personal identification number -- meaning PIN swipes are effectively exempted from the new rules. According to the Fed's December study, banks charge an average of 56 cents on debit card transactions that require a customer's signature for authorization, compared to 23 cents for the more secure PIN payments.

While the cost per purchase appears small, they add up to billions of dollars every month. According to data from the Nilson Report, an industry publication, banks scored $16 billion in 2009 on debit card swipe fees, with half of the total flowing to just 10 banking behemoths.

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More: http://www.huffingtonpost.com/2011/06/29/swipe-fees-cap-federal-reserve-wall-street_n_887193.html

:wtf:

[Harmony Blue]

1. This is so strange

If I recall correctly you have more rights if you use a signature to complete a transaction compared to using a pin. This would be a lose/lose situation for the consumer.

[unblock]

3. legally that may be the case, but a pin is stronger security because it's verified up front

[Autumn]

2. Wasn't it part of the banking reform to limit these

fees? I had thought this was covered under that. Either way, FUCK the Fed.

[unblock]

4. why blame the fed? why not blame the influence of money on the government?

the companies that benefit from the higher fees pour a TON of money into getting a higher cap, and they put pressure on many people in government, who in turn put pressure on the fed. they kept pouring more and more money in until they got the desired result.


as long as we have a system where government is easily corrupted, and where lobbying dollars are paid be a hundred-fold in terms of loopholes and looser regulation, then we'll always get results like these, one way or another.

had the fed stayed strong on this, the lobbyists would have just bought themselves a vote in congress to change the law or eventually change the composition of the fed in order to get the desired result.


the problem of corruption and co-opted regulation is VAST and far bigger than just the fed. it's a very well established part of how washington worked (or doesn't work) these days.

[Autumn]

6. Then what is the point in passing regulation?

It's all a flipping game. Perhaps the head of the Fed needs his ass removed from office.

[unblock]

7. yeah, great, get someone in even more to the liking of the powerful interests.

bernanke's not my idea of an ideal fed chair, but he's a far cry better than greenie. now THERE was a tool for the rich and powerful.

what we really need is serious reform of campaign financing and lobbying and related ethics. but of course the republicans, including the supreme court majority, are pushing us ever further in the wrong direction in terms of enabling corruption.

the idea that replacing the fed chair would do squat as far as this is concerned is a joke.
at best it's like sticking your finger in one of 1,000 holes in the dam.

the effect of money in washington is overwhelming and until we fight against THAT, we'll only ever be able to win small battles en route to losing a big, big war.

[SmileyRose]

5. misleading title

Fees are being cut in half, not being raised.

Banks are charging 56 cents now. They'll be limited to 24 cents instead.

While that's not as big a cut as some were pushing for, it's still a cut.

[ohbill]

8. The actual limit is 21¢.

Before this new rule, there was no limit.