Deal maintains certain debit card bank fees

WASHINGTON — Limits on the fees banks charge merchants who accept debit cards would not apply to government-issued cards, under a tentative House-Senate deal aimed at easing worries raised by state treasurers.

The agreement softens a Senate provision in a broad financial regulation bill that requires the Federal Reserve to limit the amount banks collect from merchants for every debit card transaction.

That provision, approved by the Senate last month 64-33, aimed to save retailers billions of dollars in debit card fees. Merchants said the charges resulted in inflated costs to consumers.

Under the tentative deal, the limits would not cover debit cards issued by the federal or state governments, which use the cards for programs such as unemployment or child support payments. Merchants typically pay between 1 and 2 percent of a debit card transaction to banks and the credit card networks, mainly Visa and MasterCard.

Most of the money goes to the banks. The agreement requires the Federal Reserve to set limits on those fees, based on what it considers "reasonable and proportional" to the cost to banks. The agreement allows the Fed, in determining the fee amount, to consider the banks' costs of protecting against debit card fraud.

The deal was struck by Sen. Richard Durbin, D-Ill., lead sponsor of the debit card proposal, and members of a House-Senate panel working out differences between the two chambers' financial regulation bills. The original House legislation did not contain restrictions on debit card fees.

The agreement is included in a broader House offer to the Senate from Rep. Barney Frank, D-Mass., who is leading the House-Senate effort to assemble a compromise bill.

Frank's offer, which the panel will discuss Tuesday, also proposes that auto dealers and pawnbrokers be exempt from regulations and oversight of a proposed consumer financial protection bureau. The House, when it passed its bill in December, excluded auto dealers and pawnbrokers, while the Senate did not.

Auto dealers have argued that while they might assemble loans for car buyers, they do not administer or service the loans.

Frank also proposed to add a provision that would place payday lenders, money remitters, check cashers and firms that provide private student loans under the consumer bureau's supervision.

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