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June 30, 2011

Feds cap swipe fees at 21 cents

By The Mainebiz News Staff

The Federal Reserve has capped fees banks can charge retailers for every debit card transaction at 21 cents -- nearly 10 cents more than originally proposed.

The Fed voted 4-1 to adopt the regulation to cap the so-called swipe fees, but increased the cap from the proposed 12 cents a transaction to 21 cents, according to The Associated Press. Currently there is no limit, and banks charge an average of 44 cents per transaction. Financial institutions and payment processors said the 12-cent limit was too low to cover the cost of handling transactions, maintaining networks and preventing fraud. Earlier this month, a move to delay the Fed from instituting a limit failed to get the necessary 60 votes in the U.S. Senate. The rule takes effect Oct. 1 and only affects institutions with more than $10 billion in assets.

Saying the fees are a burden to business, retailers in Maine and elsewhere supported capping the fees; merchants in the United States paid out nearly $20 billion in swipe fees in 2009. But banks argued the limit could lead to higher costs for consumers, and Maine banking officials have told Mainebiz that smaller banks will have to adhere to the new rules in order to stay competitive.

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