U.S. banks have been in an uproar for months over one provision of last year’s Dodd-Frank financial reforms limiting the fees imposed on debit card transactions. Their arguments won a major victory yesterday, as Reuters reports that the Federal Reserve decided to reduce the limitations in its final proposal.
The Durbin amendment to the Dodd-Frank bill called for the Fed to research fees on debit card swipe fees and establish a set of fair limitations. In January, the Fed proposed setting the limit at 12 cents per transaction, instead of the standard formula that usually charged around 1.14 percent of the purchase, averaging around 44 cents, according to The New York Times.
After several months of debate, the Fed met again on Wednesday, June 29, and decided to raise its proposed limit to 21 cents, adding an additional 1 cent for meeting certain fraud prevention standards.
The news was still met with some grumbling in the banking community, which stands to lose roughly half of its swipe fee revenue, roughly $16 billion in 2010. Credit networks like Visa and MasterCard, however, saw a dramatic boost in their stock prices.