The Federal Reserve Board staff has proposed two alternatives to debit interchange fee regulation. Both would set a maximum of 12 cents per transaction for debit cards with no apparent distinction between signature and PIN. Under one proposal, there would be a safe harbor of 7 cents, and issuers could make a case for up to 12 cents based on their actual average variable cost of authorization, clearing and settlement. Under the other proposal, issuers would have a cap of 12 cents per transaction.
The Fed also has two proposals for the number of networks issuers have to offer on their debit cards. They are looking for comments on whether it should be two independent PIN and signature networks, or whether there should be at least two independent PIN networks and two independent signature networks.
The 12 cent per transaction fee is identical to the Reserve Bank of Australia’s cap for signature debit cards and roughly 8 cents fdor the European Commissions cap under its settlement with Visa (based on a $40 transaction).
The Federal Reserve Board voted unanimously to release the proposals for public comment and there was no apparent opposition from any Board member to the massive reductions in debit card interchange fee revenues that the proposed rules would lead to.
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