Learn More - Click Here!

Thread Options
#1571854 - 06/29/11 08:52 PM Final Fed debit card draft less costly to banks
QCL Offline

Power Poster
QCL
Joined: May 2002
Posts: 6,256
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]
_________________________

Return to Top
#1571904 - 06/29/11 09:44 PM Re: Final Fed debit card draft less costly to banks QCL
BrendaC Offline
Power Poster
BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
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.
_________________________
Life without Jesus is like an unsharpened pencil - it has no point.

Return to Top
#1571915 - 06/29/11 10:16 PM Re: Final Fed debit card draft less costly to banks BrendaC
Doug Hendrickson Offline
Power Poster
Doug Hendrickson
Joined: Oct 2009
Posts: 3,927
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?
_________________________
I hear and I forget. I see and I remember. I do and I understand.--Confucius

Return to Top
#1572075 - 06/30/11 01:53 PM Re: Final Fed debit card draft less costly to banks Doug Hendrickson
Carolina Blue Offline
Platinum Poster
Carolina Blue
Joined: Jul 2005
Posts: 950
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?

Return to Top
#1572558 - 06/30/11 07:18 PM Re: Final Fed debit card draft less costly to banks Carolina Blue
Kaos Offline
100 Club
Kaos
Joined: Dec 2002
Posts: 130
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.)

Return to Top
#1572572 - 06/30/11 07:30 PM Re: Final Fed debit card draft less costly to banks Kaos
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 75,723
Galveston, TX
Has anyone contemplated charging a monthly or annual fee for debit cards?

Many banks have for years.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1572698 - 06/30/11 08:57 PM Re: Final Fed debit card draft less costly to banks rlcarey
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,000
Cape Cod
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.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1572718 - 06/30/11 09:14 PM Re: Final Fed debit card draft less costly to banks John Burnett
Doug Hendrickson Offline
Power Poster
Doug Hendrickson
Joined: Oct 2009
Posts: 3,927
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!
_________________________
I hear and I forget. I see and I remember. I do and I understand.--Confucius

Return to Top
#1572729 - 06/30/11 09:20 PM Re: Final Fed debit card draft less costly to banks John Burnett
Doug Hendrickson Offline
Power Poster
Doug Hendrickson
Joined: Oct 2009
Posts: 3,927
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.
_________________________
I hear and I forget. I see and I remember. I do and I understand.--Confucius

Return to Top
#1572737 - 06/30/11 09:27 PM Re: Final Fed debit card draft less costly to banks Doug Hendrickson
Kaos Offline
100 Club
Kaos
Joined: Dec 2002
Posts: 130
This is terrific John!

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

Return to Top
#1572886 - 07/01/11 01:57 PM Re: Final Fed debit card draft less costly to banks Kaos
zitch70 Offline
Gold Star
Joined: Apr 2001
Posts: 331
Edinburg, Texas
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.

Return to Top
#1573134 - 07/01/11 05:28 PM Re: Final Fed debit card draft less costly to banks zitch70
Princess of Power Offline
Gold Star
Princess of Power
Joined: Aug 2002
Posts: 406
Napa, CA
John - LOVE it. Thank You

Return to Top
#1573245 - 07/01/11 06:53 PM Re: Final Fed debit card draft less costly to banks Princess of Power
Carolina Blue Offline
Platinum Poster
Carolina Blue
Joined: Jul 2005
Posts: 950
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.

Return to Top
#1573251 - 07/01/11 06:56 PM Re: Final Fed debit card draft less costly to banks John Burnett
Derwood Offline
100 Club
Joined: Nov 2009
Posts: 179
Another vote in favor of the new format.
_________________________
"The mountains are calling and I must go." - John Muir

Return to Top
#1573520 - 07/05/11 01:16 PM Re: Final Fed debit card draft less costly to banks Derwood
Soccer Offline
Platinum Poster
Joined: Jan 2010
Posts: 995
Utopia
Thanks for including the commentary;
_________________________
Everything happens for a reason

Return to Top
#1573548 - 07/05/11 01:45 PM Re: Final Fed debit card draft less costly to banks Soccer
MyBrainHurts Offline
Platinum Poster
Joined: Feb 2010
Posts: 960
Illinois
I also really like seeing the commentary on the same page. It's a great help.
_________________________
I thought getting old would take longer.

Return to Top
#1573607 - 07/05/11 02:34 PM Re: Final Fed debit card draft less costly to banks MyBrainHurts
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,000
Cape Cod
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.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top

Moderator:  Andy_Z