WASHINGTON Sen. Richard Durbin, the architect of the controversial cap on debit fees, hailed yesterday’s court ruling striking down the Fed’s 2011 cap, saying the ruling will be good for consumers as it is expected to result in even lower debit fees charged to merchants.
The court’s ruling, said the Illinois Democrat, “is a victory for consumers and small businesses around the country and will lead to lower interchange rates for billions of debit card transactions each year. The Fed’s 2011 decision to bend to the lobbying by the big banks and card giants cost small businesses and consumers tens of billions of dollars and did not do enough to rein in the anti-competitive, anti-consumer practices of Visa and MasterCard.”
“By requiring debit card fees to be reasonable, and by cleaning up Visa’s and MasterCard’s worst abuses, small businesses and their customers will be able to keep more of their own money and common sense and fairness-not big bank profits—will be the guiding force of the swipe fee system,” said Durbin.
Durbin said the Fed’s 2011 ruling deviated from the intent of his amendment to the 2010 Dodd-Frank Act by allowing the inclusion of additional costs incurred by card issuers in a debit transaction, something the court agreed with. “This inclusion,” said Durbin, “raised the overall debit interchange cap, costing consumers and small businesses billions of dollars.
Yesterday’s ruling by the U.S. District Court for the District of Columbia struck down the Fed’s 2011 rule which set the interchange cap for large issuers, those over $10 billion in assets, at 21 cents per transactions, less than the average 44 cents they had been receiving. The court ordered the Fed to redo the rule, most likely at a lower rate. Credit unions and banks insist the cap on large issuers has negatively impacted them by pushing down rates on interchange fees they also receive from Visa and MasterCard.
Debit fees have become one of the biggest sources of non-interest income for credit unions, which earn around $5 billion a year, most of it, an estimated $3 billion, from fees on debit transactions, the rest from credit cards.
