Debit Card Interchange Fee Ruling Could Impact Reward Checking

by. Ken Tumlin

A federal district court judge on Wednesday overturned a Federal Reserve rule capping interchange fees that banks receive on debit card purchases. According to the Los Angeles Times:

“In a scathing opinion Wednesday, U.S. District Judge Richard Leon agreed with retailers that the Fed went too easy on big banks in 2011 when it set the limit on such fees at 21 cents for each transaction, overruling its own staff’s recommendation for a cap of 12 cents.”

I had thought this debit card issue had long been settled. I reported on when the Fed announced the rules two years ago. The rules have been in effect since October 2011.

It may appear this ruling is good news since it’s against the big banks and the Federal Reserve. However, the ruling may affect small banks and credit unions, and it may not be good news for savers who have been helped by debit card reward programs like high-interest reward checking accounts. The National Association of Federal Credit Unions (NAFCU) published the following warning:

“A federal district court judge’s decision to overturn the Federal Reserve’s rule on debit interchange fees is “extraordinary” and “will have major repercussions for members of both small and large credit unions,” NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt said Wednesday.

The Fed’s debit interchange fee cap – 21 cents per transaction – applies to all debit-card issuers with more than $10 billion in assets, but NAFCU holds that market forces will, over time, force all issuers to adopt the cap. Hunt said the effects of the court’s ruling vacating the Fed regulation – both with respect to the debit interchange fee cap and provisions on network exclusivity – will likely be felt by all issuers, including the smaller credit unions and banks the Durbin amendment purports to protect.”

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