5/2/2012 Fed: Banks' debit card fees declined substantially

The average interchange fees for banks with more than $10 billion in assets dropped 45 percent from 43 cents in 2009 to 24 cents during 2011’s fourth quarter, according to Federal Reserve data released yesterday. The Fed’s final rule implementing the Durbin amendment became effective Oct. 1, 2011.

The average fees so-called exempt banks with less than $10 billion in assets received remained at 43 cents during the fourth quarter, the data show. ABA President and CEO Frank Keating noted that the Durbin amendment’s phased implementation makes it impossible for the Fed’s initial report to fully reflect or predict the consequences of upending the marketplace with government price controls.

“It’s just too soon to tell” about the Durbin amendment’s full effect on community banks, Keating said. But its impact on consumers and small businesses has never been more apparent. “While retailers pocket $7 billion annually from lower interchange costs, their customers pay higher fees as institutions adjust to government-imposed losses in revenue,” he said.

“At the same time, many small businesses now face higher interchange rates for low-dollar transactions, a classic example of strange things that occur when government creates unnatural pressures to make up for lost revenue,” Keating said. “The Durbin amendment’s primary beneficiaries continue to be big-box retailers who want to reap the benefits of our nation's payments system without paying for it or passing along their savings to customers as promised.”

He added that ABA firmly believes the Durbin amendment’s small-bank exemption can’t work in the long term. “No legislation can exempt community banks from market forces, and having two prices for the exact same product is simply not sustainable in a competitive system,” Keating said.