Fed Won’t Touch Interchange Caps 

The Federal Reserve won’t change the caps that limit the amount of debit card interchange that large asset debit issuers can make per transaction.

The decision came after a recent Federal Reserve report documented a slip in debit interchange income for smaller issuers such as credit unions, reported CU Times.
The report, “2011 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions,” is the second report the Federal Reserve has issued in compliance with the Electronic Funds Transfer Act.

“This just proves what we’ve said all along – a two-tier debit interchange system would not work in practice,” MCUL & Affiliates CEO David Adams said. “But while Sen. Durbin and the Fed promised to revisit the issue if interchange income fell, they have now declined.

“In addition, studies have shown that consumers have not seen the savings that merchants promised.”

The document reported the total number of debit card transactions in 2011 along with the interchange they generated and found that small asset debit card issuers, which were supposed to be exempt from the cap, had in fact seen their debit interchange decline on a per transaction basis.

“Overall transactions, exempt issuers received an average interchange fee of 43 cents per transaction, a 4% decline from the 45 cents per transaction average during the first nine months of 2011,” the report said.

A previous credit union survey by CUNA showed a similar decline.

Submissions to Monitor may be emailed. Bryan Laviolette is the editor of Monitor. Contact him by email or call (800) 262-6285, ext. 233. The newsletter of the Michigan Credit Union League is published Monday mornings or Tuesday mornings when Monday is a holiday. There is no Monitor the week after Christmas and the week after the Annual Convention and Exposition. The MCUL reserves the right to edit submissions for clarity and space.
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