Debit Card Fee Cap May Be Delayed

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When Congress passed its financial system overhaul last year, an amendment was added to limit how much banks can charge merchants each time a customer swipes their debit card. As the new law gets closer to reality, members of Congress are being urged to reconsider the debit fee amendment.

STEVE INSKEEP, host:

When Congress passed its financial system overhaul last year, an amendment was added. It put limits on what banks can charge merchants each time a customer swipes a debit card. Now, some members of Congress are being urged to reconsider.

NPR's Tamara Keith reports.

TAMARA KEITH: When the amendment was approved, it was billed as a win for consumers and a win for retailers. Big banks said they'd lose billions. But smaller, community banks and credit unions were supposed to be protected by an exemption. Then the Federal Reserve came out with its proposed rule in December, and a major uproar ensued. It would dramatically cut the fees banks can charge merchants for each transaction.

House and Senate committees both held hearings on the issue yesterday. In the Senate Banking Committee, Federal Reserve Chairman Ben Bernanke expressed reservations.

Mr. BEN BERNANKE (Federal Reserve Chairman): We are not certain how effective that exemption will be. It is possible that that exemption will not be effective in the marketplace.

KEITH: Or as Frank Michael, the CEO of a small credit union in Stockton, California put it to members of the House Financial Services Committee...

Mr. FRANK MICHAEL (CEO, Allied Credit Union): Under the current proposal, we're going to lose money on every transaction. The only real question is how much.

KEITH: Even members of the committee who had originally supported the amendment openly questioned whether there was now a risk of unintended consequences.

Democratic Congressman David Scott was among many who called on the Federal Reserve to delay implementing the rule.

Representative DAVID SCOTT (Democrat, Georgia): The banks are not going to pay for this. The merchants are not going to pay for this. You know who's going to pay for this? It's going to be the American consumers at the end of the line.

KEITH: But, retailers who have been pushing for this for years made it clear they're not interested in a delay.

The Federal Reserve can't actually change the timetable. It was created by Congress, and can only be changed by Congress. The new rule is set to be finalized April 21st.

Tamara Keith, NPR News, Washington.

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