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#1571854 - 06/29/11 08:52 PM Final Fed debit card draft less costly to banks
QCL Offline
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QCL
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NW IL
Apologies if this has already been posted.

http://www.marketwatch.com/story/final-f...?dist=afterbell

[snip]
SHINGTON (MarketWatch) — The Federal Reserve is set to provide relief to banks when it votes Wednesday afternoon to adopt controversial debit-card rules that are set to shift billions of dollars in revenue from financial institutions to merchants.

According to a draft final rule released by the central bank, the Fed will vote to cut fees that retailers pay to accept debit-card payments to 21 cents, plus a conditional charge of a penny and 0.05% of the transaction value for fraud prevention.

[/snip]

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#1571904 - 06/29/11 09:44 PM Re: Final Fed debit card draft less costly to banks QCL
BrendaC Offline
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Fed Adopts Improved Debit Interchange Rule
Fed Increases Base Rate to 21 Cents, Allows for Recovery of Additional Fraud Costs

The Federal Reserve Board today approved a final debit-card interchange rule that would cap an issuer’s base fee at 21 cents per transaction and allow an additional 5 basis-point charge per transaction to help cover fraud losses. The Fed also issued an interim final rule that allows a fraud-prevention adjustment of 1 cent per transaction conditioned upon an issuer adopting effective fraud prevention policies and procedures.

The Fed also adopted requirements that issuers include two unaffiliated networks for routing debit transactions -- one signature-based, one PIN-based. The effective date for the final and interim final rules on the pricing and routing restrictions is Oct. 1.

For an average $40 transaction, the new combined rate of 24 cents -- including the fraud-loss surcharge -- enables issuers to recover twice as much as they would have been allowed under the Fed’s original 12-cent price cap proposal. Because the 5 basis point adjustment for fraud losses will fluctuate with the size of the transaction, the interchange level will also fluctuate. The new pricing, however, is still about a 45 percent reduction from current market rates and will negatively impact revenue at all banks, including community banks.

Though the Fed noted that it has limited means available to enforce the statutory exemption of issuers with under $10 billion in assets, the Fed staff recommended the board take steps to reinforce the exemption. Those steps include publishing annual lists of institutions that fall above and below the $10 billion threshold to help payment card networks determine which issuers are subject to the caps. They also include producing an annual survey of the average interchange transaction fee each network provides to covered and exempt issuers. Such reports will allow issuers to compare revenue they would receive from each network and allow others to monitor the effects of the law, the Fed board’s staff memo said.
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#1571915 - 06/29/11 10:16 PM Re: Final Fed debit card draft less costly to banks BrendaC
Doug Hendrickson Offline
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So does this mean that it is up to the networks (and, presumably each Community Bank) to ensure that they know who is and who is not exempt from the regulation? And that if we are exempt we are not limited to the cap, but to our agreement with the network?
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#1572075 - 06/30/11 01:53 PM Re: Final Fed debit card draft less costly to banks Doug Hendrickson
Carolina Blue Offline
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Lost in a regulatory fog
Looks like it. Still reading but the rule states the Fed will annually publish a list of banks above or below the $10 billion mark and I guess it is up to the network to setup the fee based on the list.

Looks as though the retailers are PO'ed about the $.21 and the fraud provision. Is it possible or probable the reatilers take this to court for the Fed not adhering to the Act?

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#1572558 - 06/30/11 07:18 PM Re: Final Fed debit card draft less costly to banks Carolina Blue
Kaos Offline
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Has anyone contemplated charging a monthly or annual fee for debit cards?

How about free debit cards with PIN/debit access, but an additional charge for those who want to have signature based/credit access? (The signature based being the most costly in terms of fraud risk.)

Some of our customers have requested that we turn their credit access off to mitigate fraud. (They are listening and learning.)

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#1572572 - 06/30/11 07:30 PM Re: Final Fed debit card draft less costly to banks Kaos
rlcarey Online
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Has anyone contemplated charging a monthly or annual fee for debit cards?

Many banks have for years.
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#1572698 - 06/30/11 08:57 PM Re: Final Fed debit card draft less costly to banks rlcarey
John Burnett Offline
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Just an FYI: You'll find the new Regulation II as the newest addition to our ABCSoup page at www.bankersonline.com/abcsoup/abcsoup.html

I tried something different this time, given the relatively short sections and Commentary. Each of the 10 sections of the Reg is on its own page, with its Official Board Commentary (on the same page).

Let me know what you think.
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#1572718 - 06/30/11 09:14 PM Re: Final Fed debit card draft less costly to banks John Burnett
Doug Hendrickson Offline
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Consider me a fan of the new layout. Oftimes I forget to check the commentary, so this makes it much easier to remember and to go back and forth between the commentary and the regulation.

THANKS!
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#1572729 - 06/30/11 09:20 PM Re: Final Fed debit card draft less costly to banks John Burnett
Doug Hendrickson Offline
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John...perhaps it's already there and I just don't see it, but is there a way to easily go back to the regulation itself? By that I mean, if I click on one part of the regulation and then follow some of the links through other parts of the regulation, you've got to either keep going 'back' or click on "Alphabet Soup". In addition to the "Back to Top" link, it might be beneficial to have a "Back to Regulation" link so as to get to the highlest level of that regulation. Again, perhaps there already is an easier way.
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#1572737 - 06/30/11 09:27 PM Re: Final Fed debit card draft less costly to banks Doug Hendrickson
Kaos Offline
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This is terrific John!

So I guess I should have asked if anyone has "implemeted" debit card annual/monthly fees.

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#1572886 - 07/01/11 01:57 PM Re: Final Fed debit card draft less costly to banks Kaos
zitch70 Offline
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Great. Hope other Regs with commentary are modified like II. I do not know about space requirements, but a side by side may keep from scrolling down.

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#1573134 - 07/01/11 05:28 PM Re: Final Fed debit card draft less costly to banks zitch70
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John - LOVE it. Thank You

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#1573245 - 07/01/11 06:53 PM Re: Final Fed debit card draft less costly to banks Princess of Power
Carolina Blue Offline
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Lost in a regulatory fog
I like the new format too.

Kaos, I know when our accounting dept. ran the numbers based on the proposed $.12 fee and last years transactions, we would have to charge all debitcards around $4/month to maintain the current revenue stream. Obviously, we are under $10 billion, so right now we're sitting around waiting to see what happens.

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#1573251 - 07/01/11 06:56 PM Re: Final Fed debit card draft less costly to banks John Burnett
Derwood Offline
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Another vote in favor of the new format.
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#1573520 - 07/05/11 01:16 PM Re: Final Fed debit card draft less costly to banks Derwood
Soccer Offline
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Thanks for including the commentary;
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#1573548 - 07/05/11 01:45 PM Re: Final Fed debit card draft less costly to banks Soccer
MyBrainHurts Offline
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I also really like seeing the commentary on the same page. It's a great help.
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#1573607 - 07/05/11 02:34 PM Re: Final Fed debit card draft less costly to banks MyBrainHurts
John Burnett Offline
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There are some regulations like Regulation I ("Issue and Cancellation of Capital Stock of Federal Reserve Banks") that are so short that, if I were setting them up for the first time, I would put on a single page. The fact that there's no published commentary to that regulation would make it that much easier.

The flip side of that question is apparent when you look at Regulation Z. It's just plain HUGE!, and the Commentary is longer than the regulation itself. Putting it all on a single page would create havoc with many browsers (just a huge bandwidth hog, and time consuming to load). But it's probably one that I, were I starting from scratch, would consider patterning after what I did with Regulation II -- with commentary on the same page with the regulation itself. Perhaps someday when the pace of change slows down a bit, I'll have the time to do that.
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