The Federal Reserve announced yesterday that it would limit the fee that banks can charge retailers for debit card swipes to about 21 to 24 cents, higher than the initial proposal of 12 cents, according to Bloomberg.
After six months of lobbying, banks were able to convince the Federal Reserve that the initial proposal for the cap on swipe fees, also known as interchange fees, was too low. Currently, banks charge retailers an average of 44 cents per swipe fee. The banks said about $16 billion was at stake if the fee was limited to 12 cents, and that the lost revenue would need to be made up by increasing charges for consumers.
Merchants argue that lower interchange fees would allow them to pass savings along to consumers, according to The Wall Street Journal.
The change is set to take place on October 1, later than the initially proposed start date in July.
The current interchange fee is changing because of the Durbin Amendment, a 2010 addition by Senator Richard Durbin (D-Ill.) to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The amendment gave the Federal Reserve the ability to limit the amount banks can charge for debit card swipe fees.
Smaller banks with less than $10 billion in assets will be exempt from the rules.