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Small banks have been unaffected by the changes to debit card transaction fees under last year's Dodd-Frank Wall Street Reform and Consumer Protection Act and competition remains absent from the debit payment market, according to a new report issued by the Federal Reserve last week.
In a six-month review on the extent to which networks have established separate interchange fee schedules and how the interchange fees received by exempt issuers compare with those before the 2011 Federal Reserve rule became effective, the Federal Reserve Board found that small and medium-sized banks and credit unions are prospering and small institutions are unaffected by swipe fee reform.
"The gloom-and-doom predictions of reform opponents have proved false," said Douglas Kantor, counsel to the Merchants Payments Coalition (MPC).
When Congress passed the Durbin Amendment as part of the Dodd-Frank financial-reform law in 2010, small banks and credit unions argued they would be harmed even though the amendment exempted financial institutions under $10 billion in assets.
The Fed report shows the average swipe fee on a purchase for these small institutions was 43 cents in the fourth quarter – the same as it was in 2009. For large banks, the average dropped to 24 cents.
The Federal Reserve last October changed the per-transaction cap on debit card transaction fees to 21 cents. The Fed also banned banks from routing debit card transactions through any one payments network, beginning in April 2012, and required at least one unaffiliated network on all debit cards.
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