US Banks Forced to Limit Debt Card Fees

According to the NY Times, legislation was passed by the US Senate several days ago to "impose price controls on debit transactions over the furious objections of the beleaguered banking industry."

The Durbin amendment gives the Federal Reserve new authority to regulate and limit the fees that businesses pay to card companies. It specifically addresses payments processed through the Visa and MasterCard networks. American Express and Discover cards are not covered by the bill...
 
The legislation directs the Fed to cap those fees at a level that is “reasonable and proportional” to the cost of processing transactions. The Nilson Report estimated that last year, fees averaged 1.63 percent of the transaction amount.

A second set of provisions applies to both credit and debit card transactions. Visa and MasterCard impose an all-or-nothing requirement on businesses, requiring them to accept cards even on small transactions, and prohibiting businesses from offering discounts based on the method of payment. The amendment strikes those rules.

Despite the narrative of the Times article, the change in rates is not necessarily a victory for consumers, but  rather a win for businesses (including some very large ones like Amazon.com, Home Depot, and Walmart) over the much reviled banks.   This was a contest between lobbyists for the banks versus lobbyists for retail businesses utilizing debt cards. 

Earlier last year, consumers did achieve a decisive victory through the Credit Card Accountability Responsibility and Disclosure Act of 2009, which includes the following:

• Cardholders Deserve Protections against Arbitrary Interest Rate Increases
• Cardholders Who Pay on Time Should Not Be Penalized.
• Cardholders Should Be Protected from Due Date Gimmicks.
• Cardholders Should Be Protected from Misleading Terms.
• Cardholders Deserve the Right to Set Limits on Their Credit.
• Card Companies Should Fairly Credit and Allocate Payments.
• Card Companies Should Not Impose Excessive Fees on Cardholders.
• Vulnerable Consumers Should Be Protected From Fee-Heavy Subprime Credit Cards.
• Congress Should Provide Better Oversight of the Credit Card Industry.

Overall, these two pieces of legislation firmly limit some of the excessive and predatory actions conducted by the banks upon both consumers and retail operations alike.