A recent decision by a federal judge could cost U.S. banks almost $7 billion in reduced revenues from debit card swipe fees.
That's according to Fitch Ratings, a corporate credit ratings and research company in Chicago, which estimates that $4.9 billion to $6.9 billion in annual bank fee revenue could be at risk if per-transaction swipe-fee caps are cut by anywhere from 7 cents to 12 cents, as the court ruling suggested.
The current fee structure, which caps debit card swipe fees at 21 cents, plus a few extra cents to cover certain costs, is expected to continue until the Federal Reserve, which sets the caps, appeals the decision or revises its existing rules. Either option could take a long time to play out.
Bank of America, Wells Fargo and JPMorgan Chase & Co. account for more than half of total U.S. debit card transaction volume and thus are most likely to be affected by the decision, Fitch said.
That said, the impact might be significant since banks likely will add or increase other debit card fees or reduce or eliminate existing debit card perks to make up the difference, Fitch said.
In the court case, a federal judge said the Fed set the legally mandated caps on debit card swipe fees too high. These fees, also known as interchange fees, are small amounts that banks charge merchants to process debit card transactions.
The caps are required by the Durbin Amendment, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Many banks already have imposed minimum balance requirements and monthly fees for checking accounts that used to be free and curtailed or eliminated popular debit card rewards programs that were funded by bank swipe-fee income.
The decision that the fees must be lower appears to be a win for retailers, who say the caps allow them to pass along savings to customers. The ratings agency said whether consumers would benefit in that way "remains unclear."
What do you think the chances are the swipe fees will fall?
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