Reuters: Regulatory News: RPT-US small banks not hurt by debit fee crackdown-Fed data

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RPT-US small banks not hurt by debit fee crackdown-Fed data May 1st 2012, 21:52 Tue May 1, 2012 5:52pm EDT * Fees charged by small banks drop little after cap in place * Community banks say too soon to measure fee cap's impact * Fees charge by large banks drop sharply, as expected By Dave Clarke WASHINGTON, May 1 (Reuters) - A U.S. crackdown on the fees banks can charge merchants when a debit card is used is not having a big impact on community banks despite previous fears it could hurt the small lenders, according to data released on T ues day. But community banking groups and other critics of the crackdown were quick to dismiss the data, released by the Federal Reserve, saying it only covers the first three months that the fee restrictions have been in place. "It's just too soon," said Viveca Ware, a senior vice president at the Independent Community Bankers of America. "We still believe that over the long term that regulated debit interchange will hurt community banks and the customers they serve." The 2010 Dodd-Frank financial oversight law requires the Fed to set a cap on what banks can charge a merchant when a debit card is used. The fee crackdown was the source of an intense lobbying fight between banks and merchant groups while the Fed wrote the rule last year. Banks decried the so-called Durbin amendment as a price-fixing move designed to benefit big box retailers, with little if any savings for consumers. Small banks, whose concerns have the ear of lawmakers who do not want to be viewed as hurting institutions with close ties to their local communities, played a central role in the pushback. The law exempted small banks - those with less than $10 billion in assets - from the restrictions. But community bankers complained that it will be impossible to establish a two-tier system, and that ultimately card networks like Visa Inc and MasterCard Inc, which manage the transactions, will collect the same amount of fees per transaction regardless of the size of the bank that issued the card. The Fed's final rule that took effect in October highlighted the exemption for small banks. For other institutions the rule limited the per-transaction fee to 21 cents plus 0.05 percent of the transaction total. That amount compared with an average fee charged per transaction, or swipe, of 43 cents in 2009. So far, however, the limited data available shows the exemption has not greatly reduced the fees going to small banks. The Fed will release data on "swipe fees" annually. The information released Tuesday covered 2011, which includes the first three months the restriction was in effect. In the first three months of the crackdown, for cards that are exempt from the crackdown, which includes those issued by community banks and credit unions, the average transaction fee fell from 45 cents to 43 cents, according to the Fed. "The facts have proved that what they've said hasn't come to pass," said Mallory Duncan, a general counsel for the National Retail Federation, referring to complaints from small banks. The data showed, as expected, that the new restrictions will cause large banks to lose billions of dollars in fees. The average fee charged to merchants by large banks fell from an average of 50 cents per transaction to an average of 24 cents for the last three months of the year. In its 2011 annual report, JPMorgan estimates the Durbin amendment will cost the bank $600 million annually. Overall in 2011 there were 46.7 billion debit card transactions, valued at more than $1.8 trillion, according to the Fed. Link this Share this Digg this Email Reprints

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