Officials from Visa revealed plans to manage two tiers of interchange fees, bringing costs for its debit and credit card platform into compliance with new government regulations. Company representatives held conference calls and webinars early this month with banks and credit unions potentially affected by the change.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July 2010, charges the Federal Reserve with setting ceilings for interchange fees assessed to retailers and other credit card merchants. The Fed's most recent proposal would cap debit card processing costs at 7 to 12 cents per transaction, a drop of nearly 70 percent from typical interchange fees.
An amendment to the original bill, sponsored by Illinois Senator Dick Durbin, applies different rate caps based on the size of the bank. Banks with more than $10 billion in assets face more restrictive rules, while smaller banks and credit unions can continue to compete in a relatively unregulated market. However, retail industry analysts note, merchants tend to gravitate toward the least expensive payment processing solutions on the market.
Numerous banks and credit card payment processors have filed lawsuits challenging the constitutionality of the Durbin Amendment. Critics of the law believe that retailers may be reluctant to pass savings along to their customers, while large banks will institute new account fees to make up for lost revenue. Proponents of the law have speculated that two-tier interchange fees would help small banks and credit unions compete more effectively for consumers' debit and credit card business.