WEST DOVER, VT.–Their silence on the Federal Reserve Board’s proposal to regulate debit card interchange rates could be counterproductive for independent sales organizations and merchant acquirers, Holli Targan, president of the Electronic Transactions Association, told attendees here at the Northeast Acquirers Association conference.
The Fed, as mandated by the so-called Durbin amendment to the Dodd-Frank Act, in December proposed two scenarios that would cap the debit card interchange at 12 cents per transaction (
“There will be a lot of pressure from the retail industry to get the law in place as soon as possible,” Targan said. While she is aware of efforts that might delay implementation of the law, she is not betting that will happen.
That is one reason why she urged ISOs and acquirers to speak up. “Even if you agree with the Fed, you should comment that they got it right,” Targan said, noting that without such feedback the Fed may be swayed by others who think differently.
An ISO or acquirer might want to comment on how charge-backs, which cost ISOs and acquirers recurring revenue, would be accommodated under the proposed regulation. As a way to lessen potential fraud, would a payment network be likely to change its rules so more transactions are subject to charge-backs? Targan asked.
Many questions remain about the Fed’s proposal, Targan said.
And the unsettled aspects of the Durbin amendment have some merchant-level salespeople wondering how it will affect them. Indeed, there are several subjects, such as network exclusivity and merchant-routing rules, that the Fed would like to see more comments on, Targan said.
“There’s not enough information to see how [enactment of the legislation] will happen,” says one independent sales agent, who asked not to be identified. “The Fed is on a hunting expedition to see how it will work.”
Merchants also know little about the proposal and how it might affect them, the sales agent says. “The only thing I’ve heard is the merchant thinks it will lower their costs,” she says. “They have no idea how it will do that or the cost to the industry to implement the program.”
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