Business & Finance

Congress convenes hearing on debit card fee cut proposal

debit card

A federal proposal to impose cut in the current charges levied by banks and card network companies on the use of debit card is headed for a debate as a Congressional body hearing the issue convenes on Thursday.

Banking institutions who are strongly opposing the proposed measure are expected to press lawmakers for relief from the slashing of debit card fees, a move that has so far generated wide support in Congress.

Leading global card network companies Visa and Mastercard have urged the Federal Reserve to revise its proposal cutting debit fee processing by 75 percent.

But the debit industry acceded that a favorable Fed action to ease up on the proposed cut would be a tough task to hurdle.

“That’s why were taking the matter to the Capitol Hill where we have our lobbying chances” said an industry representative.

On Thursday, the House Financial Services subcommittee will hear from Fed Governor Sarah Raskin and debt industry representatives on the proposal which the Fed claims would soften the impact of the Dodd-Frank law.

The said law, which took effect last year, has set debit card fees that are “reasonable and proportionate” to the issuers’ costs.

But since the Fed was tasked to carry out the said provision, it put forward a proposed capping of so-called interchange fees at 12 cents per debit transaction or nearly 75 percent cut from the 2009 average of 44 cents per transaction.

Debit industry representatives said the Fed proposal would shave some $13 billion off the industry’s annual $23 billion in debit card processing revenue.

The card industry lobbyists believe they have a receptive audience among Republicans who now control the House of Representatives.

Jon Mills

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