When it comes to managing money, nobody’s perfect — and that includes the Federal Reserve System.
According to a new report from the Richmond Federal Reserve, the Fed’s attempted implementation of reforms designed to make the market for debit card fees competitive did not go off without a hitch. Although debit card reform was passed by the Durbin Amendment to the Dodd-Frank financial reform bill five years ago, the preliminary study by the Richmond Fed bears out that 90 percent of merchants either hadn’t seen any resultant savings, were unsure if any had occurred or actually saw their costs related to debit card fees actually increase.
In a press release, the Merchants Payments Coalition puts forth the belief that the Fed’s inability to successfully enforce the rules established by the Durbin Amendment was a direct result of pressure from the big banks. With the latter having a vested interested in maximizing debit card fees (which were established by MasterCard, Visa and their member banks), the Fed — for example — doubled its own original estimate of a fair fee on a debit transaction. The release adds that fees likewise increased in the case of some small transactions.
Presently, the banks earn a 500 percent profit on debit card fees, which are charged to merchants on every debit transaction.
“The Richmond Fed report should be a wake-up call for the Federal Reserve,” said Lyle Beckwith, senior vice president of government relations for the National Association of Convenience Stores (NACS), a member of the Merchants Payments Coalition, in the release. “Ninety percent of merchants having their fees stay the same or go up makes no sense when Congress recognized that the price-fixed fees were too high already.”