Fed considers cutting fees banks charge for debit card transactions

The U.S. Federal Reserve on Wednesday suggested that “swipe fees” – or fees that banks can charge merchants for processing debit-card transactions -- be slashed by nearly a third, something that would cause a hit to billions of dollars in revenue for banks.

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The cap on fees would be cut by about 28% to 14.4 cents per transaction plus 0.04% of the transaction amount under the proposed plan, according to Bloomberg.

The proposal was based on data that showed the costs of processing such transactions had fallen by roughly half in recent years, Reuters reported.

It is the first time the Fed has proposed any adjustment to the fee cap set in 2011. The cap determines how much banks can charge businesses to process debit card payments.

The fees generated $31.59 billion for lenders in 2021, according to Fed data.

“Today’s proposed rulemaking signals an end to these outrageous markups,” Austen Jensen, executive vice president of the Retail Industry Leaders Association, which represents large retailers told Reuters.

In a letter to the Fed sent Friday, nine major bank trade groups said changing the charge would not help consumers since retailers don’t pass savings on to consumers and suggesting they would do so in the future “should be viewed with robust skepticism.”