Congress Takes a Swipe at Swipe Fees

Photo (cc) by o palsson

Wall Street reform is coming – and a compromise was reached today regarding one of its most hard-fought provisions.

Negotiators from the House and Senate agreed today to allow the Federal Reserve to regulate rates for debit card transactions. The fees, known as “swipe” or interchange fees, are paid by merchants in exchange for accepting debit cards. According to Illinois Senator Dick Durbin, almost $50 billion in interchange fees was collected last year and roughly 80% of that money went to the 10 largest banks in the U.S., Visa and MasterCard.

While other western countries regulate debit and credit card transaction fees, this will mark the first time such oversight will happen in the U.S. Although not all banks are affected. Those with less than 10 billion in assets – 99% of all banks – are excluded.

Since it’s likely that the Federal Reserve will guide interchange fees down from their current average of 1.6%, the big winners in the negotiation are merchants, while the losers are the mega-banks that issue debit cards. Visa and MasterCard, on the other hand, escaped relatively unscathed: today’s compromise included a provision that the Fed can’t regulate network fees, which are fees that Visa and MasterCard charge and keep for themselves. The stocks of both companies jumped on the news.

There were other parts of the final compromise that weren’t celebrated by consumer advocates: for example, fees on prepaid, re-loadable debit cards – cards often used by the poor, and ones often mentioned as having the highest fees – are excluded from Fed regulation. Also unregulated will be debit cards used by states to provide payments for things like unemployment insurance.

You can read a summary of the compromise here.

Rep. Peter Welch, a House Democrat from Vermont involved in the negotiations, said, “It preserves key protections for the grocers, retailers and country store owners most affected by out-of-control swipe fees, while addressing legitimate concerns of the industry. I am confident this agreement will be approved by the full committee because every conferee represents small business owners who are tired of serving as a piggy bank for Visa and MasterCard.”

The sponsor of the amendment, Illinois Democratic Senator Dick Durbin, said, “I’m pleased that we were able to reach an agreement which makes minor changes to strengthen consumer protections and bring competition to a market where there is none,” Durbin said. “Most importantly, we’ve addressed the concerns of states regarding their ability to provide services to the unemployed and the concerns of small financial firms regarding their ability to provide services to the unbanked.”

While this compromise has yet to be voted on as part of the final bill, it’s now expected to be passed.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
How to Get Rid of 6 Hard-to-Sell Things
How to Get Rid of 6 Hard-to-Sell Things

Find out where to sell, donate or recycle items — and feel good about it.

9 Free Things That Used to Cost Us Money
9 Free Things That Used to Cost Us Money

Not everything is getting more expensive.

14 Things We Buy and Then Almost Never Use
14 Things We Buy and Then Almost Never Use

Save your money. These items seem alluring but they often end up as coat racks and dust magnets.

5 Cheap and Easy Ways to Make Your Car Smell Delightful
5 Cheap and Easy Ways to Make Your Car Smell Delightful

These tips will leave your ride smelling delightful for next to nothing. Some options are also chemical-free.

How Baby Boomers Are Earning an Extra $573 a Month
How Baby Boomers Are Earning an Extra $573 a Month

In the gig economy, baby boomers are out-hustling their younger competition. You can cash in, too.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.