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Michigan Credit Union League Home » Information Services » Publications » News Articles  

Fed: Two-tier Interchange System Appears to be Working   (Misc News: May 1, 2012)

Interchange fees declined substantially for nonexempt card issuers, but average interchange fees for exempt issuers held steady, according to the first annual interchange study released by the Federal Reserve, indicating that the two-tier interchange system would appear to be working.

Last year, credit unions fought alongside banks to stop the so-called Durbin amendment to the Dodd Frank Consumer Protection and Wall Street Reform Act from taking effect. Credit unions lost the fight, but the Fed board said it would watch closely to see if card network operators continued to pay higher interchange fees to exempt issuers – those with less than $10 billion in assets.

In the new study, the Fed said that exempt issuers received an average of 43 cents per interchange transaction, in the fourth quarter of 2011, the same as they received in 2009. But nonexempt users saw a substantial decline in interchange fees, dropping to an average of 24 cents per transaction.

The new interchange fee structure took effect on Oct. 1, 2011.

Durbin capped debit interchange fees for issuers with assets of $10 billion or more to 21 cents. It allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. All but four credit unions are exempt from the fee cap.

Some large banks tested new fees on checking accounts and check cards about the time that the new fees took effect. That led to Bank Transfer Day, a movement that encouraged bank customers to switch their accounts to credit unions.

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