Merchants Doubt Lawmakers Will Derail New Debit-Interchange Rules

 While hope is rising in some quarters that lawmakers may direct the Federal Reserve Board to delay or avoid implementation of its proposed debit card interchange rates, a large national merchants’ association sees little chance of lawmakers derailing the proposed rules.

“It would be extraordinary for Congress to reverse something it passed overwhelmingly not many months ago, which nearly two-thirds of lawmakers voted for,” Mallory Duncan, senior vice president and general counsel for the National Retail Federation, tells PaymentsSource, referring to the so-called Durbin Amendment within the Dodd-Frank Act that Congress passed last year.

 “The Fed has indicated it’s on track to continue, as planned, with the rule-making. And before that process is complete I doubt there will be any changes,” Duncan says.

The Fed in December issued proposed rules that would limit debit interchange to fees to no more than 12 cents per transaction for the largest institutions. The comment period continues through Feb. 22 and the Fed is expected to issue the final rules April 21, which will be implemented in July (see proposal).

At a House Financial Services Committee hearing Feb. 17, lawmakers from both political parties urged the Fed to delay implementation of the provision, in particular citing potential harm to banks with $10 billion or less in assets. Fed officials made it clear during the hearing that any deviation from implementation of the rules, as scheduled, would require Congressional intervention. (see story).

“It has become clear that the proposed new debit interchange rules, which introduce competition for the first time, will save merchants and consumers $1 billion a month when they take effect, and banks don’t like this,” Duncan says. “Our feeling is that credit card companies are complaining about the proposed rules, they will complain about the final rules and they will complain about the rules when they are implemented, but the rules are fair.”

The Electronic Payments Coalition, which represents the nation’s card brands and most large card issuers, was heartened by the hearings, and on Feb. 17 issued a statement urging Congress to “stop the implementation of this harmful rule.”

The Fed’s proposed rule is “government price fixing” and could result in debit card users seeing “higher fees, fewer rewards and the loss of services like free checking,” the coalition warned.

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