Fed To Vote Final Debit Rule

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WASHINGTON – The Federal Reserve is expected to vote a final rule on debit fees a week from today, now that a credit union-backed proposal to delay the rules has been shot down in Congress.

The final rule is expected to enact a cap higher than the 12 cents per transaction proposed in December, probably as high as 20 cents, and may include additional costs, such as fraud, in setting the cap, according to several sources.

“We expect the Fed to alter its original proposal substantially,” one source familiar with the issue told Credit Union Journal last week. Fed officials declined to comment.

The Fed’s move comes after the Senate rejected a proposal to delay the debit rule for as long as two years while regulators conduct a comprehensive study on its impact, particularly the exemption for credit unions and banks with less than $10 billion in assets from the caps.

But the Fed must act quickly in order to meet a July 21 implementation date set by last year’s Wall Street reform bill, while still giving credit unions and banks a proper lead time to implement the rule. Enactment of a final rule at the Fed’s regularly scheduled Board meeting next Monday will give card issuers 30 days to implement the rule, with soft enforcement expected for the first six months or so.

Meantime, the credit union lobby last week urged the Fed to amend its December proposal.

CUNA President Bill Cheney called on the Fed to establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established and then report annually on how such a two-tiered system is working, and also provide that information to Congress; include all allowable and reasonable costs in setting the cap on interchange fees; and to revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers.

“For the 70% of the credit unions that offer debit card programs to their members, there is no more important issue than a favorable resolution on the debit card interchange rule. We urge the Board to change the rule as we have requested,” Cheney wrote in a letter to Fed Chairman Ben Bernanke.

In a separate letter to the Fed, NAFCU President Fred Becker urged that the Board use its authority under the statute to consider all of the costs necessary to operate a debit card program.


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