The Federal Trade Commission left a Christmas Eve gift for Congress, in the form of a ten-page report outlining its enforcement of 2010's Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other changes to federal finance regulations, the Dodd-Frank Act overhauled rules related to how much banks can charge retailers to process debit and prepaid card transactions.

Educating merchants about their choices

Dodd-Frank limits merchant service charges on many debit cards to a flat fee of 21 cents, plus five one-hundredths of a percent of each sale earmarked to help combat fraud. For merchants selling big-ticket items, like furniture or electronics, the new rules can save thousands of dollars per year. For example, a $5,000 sale under the old rules could have cost some merchants as much as $150 in fees, which often get passed along to customers in the form of higher prices. Under the new rules, the same transaction would cost less than $3 to process.

On the other hand, many debit card processing networks have matched their pricing schemes to the capped rates. Fast food retailers and convenience stores that previously negotiated cheaper rates for their small ticket transactions found themselves paying significantly more in processing fees. According to FTC officials, the Commission intends to educate retailers that they may legally "route" or "steer" customers to use the least expensive form of payment without violating card acceptance contracts.

Protecting small banks and credit unions

To prevent independent credit unions and smaller banks from losing too much revenue due to the new rules, the FTC exempted a list of over 14,000 financial institutions from the transaction fee caps. However, the FTC has paid closer attention to companies that issue prepaid debit cards that have earned other exemptions from the rate caps.

For instance, general purpose prepaid debit cards from American Express, Chase, and Green Dot don't qualify for the transaction rate restrictions, since they don't connect to traditional bank accounts. As a result, all three companies have marketed versions of their prepaid credit cards with significantly reduced pricing compared to their competitors. The FTC has advised card issuers and payment processing networks that the Commission will vigorously investigate merchant and consumer claims related to overcharging fees. Commission officials told Congress they intended to remain "vigilant" as the full provisions of the Act enter their second year.