After months of wrangling, the Federal Reserve Board’s decision to cap debit card interchange rates may have seemed like the final word. The reality, however, appears more complex.
Some in the payments industry may have perceived an air of finality when the Fed on July 29 approved limits in how much issuers may receive from merchant acquirers when their cards are used to make payments. In most cases, those fees will be about 21 to 24 cents, roughly half of the current average of 44 cents.
The Fed’s rule, scheduled to take effect Oct. 1, came as a result of the so-called Durbin amendment to the Dodd-Frank Act.
However, from a legal standpoint, the 350-page document that accompanied the Fed’s ruling constitutes merely an interpretation of the law, says Holli Targan, a lawyer with Southfield, Mich.-based Jaffe, Raitt, Heuer & Weiss PC. That lengthy interpretation will itself be open to further interpretation and then interpretation of interpretations that could go on for years, she says.
“It’s not black and white,” Targan says.
In essence, the acquiring industry is entering a new and unknown era, Targan says. “It’s so early in the lifespan of this whole new way of doing business” to predict its final form, she says.
Targan also is less certain about another aspect of possible federal regulation in the card industry. She used to believe Congress would address credit card interchange regulation as soon as it finished dealing with debit card rates.
“There has been fear that Durbin is the start of the slippery slope and credit is the next step,” Targan says of the possibility of federal legislation and regulation of credit card interchange. But after the protracted wrangling over the Durbin amendment, legislators may feel ready for a respite, she says.
“People on Capital Hill are interchange-weary,” Targan says, noting legislators and their staffs now have firsthand knowledge of the immensity and complexity of regulating interchange. “They may shy away from taking up that issue so quickly.”
