WASHINGTON – The Federal Reserve is planning to amend its proposal to cap debit fees at a higher rate, setting a compromise in the heated controversy between merchants and banks and credit unions while at the same time threatening efforts by banks and credit unions to delay implementation of the rule.
In the face of a withering lobby by the Electronic Payments Coalition, comprised of banks, credit unions, and Visa and MasterCard, the Fed apparently is preparing a final rule that would lift the proposed cap from seven cents or 12 cents, as proposed in December, to a higher level, several sources have told Credit Union Journal.
A higher cap is expected to satisfy some lawmakers who want to avoid voting on a bill to delay the rule for as long as two years, thus making it more difficult to pass the delay bill, the sources said.
Last year’s Wall Street reform bill required the Fed to pass a final rule on the debit caps by April 21, but Federal Reserve Chairman Ben Bernanke told congressional leaders the issue was too complicated to do so. The Fed will still pass a rule before the July 21 implementation deadline set by Dodd-Frank.
It is not clear when the Fed will vote the final rule.
Members of the Senate and House are waiting to see what the Fed’s final rule requires before they vote on separate bills to delay its implementation to allow the Fed to conduct a more comprehensive study. A bill seeking to delay implementation is opposed by Illinois Sen. Richard Durbin, author of the debit provision, who has pledged to filibuster, meaning it will require 60 Senate votes.
The stakes in the fight are enormous, with banks and credit unions earning an estimated $20.5 billion in debit fees last year, $2.6 billion of it going to credit unions.
