Business

Fed orders banks to lower retailers' debit-card fees

WASHINGTON — The Federal Reserve has taken a gentle swipe at the banking industry's multibillion-dollar business of collecting debit-card fees from retailers.

In October, the Fed said Wednesday, banks will be allowed to charge retailers only 21 cents for each debit card transaction, plus an additional 0.05 percent of the purchase price to cover the cost of fraud protection.

The final rule is not as punitive for banks as the Fed's earlier proposal, which capped the fee at 12 cents. Banks now charge an average of 44 cents.

It's unclear how consumers will be affected by the change, which was required under last year's overhaul of financial regulations.

Merchants have said reduced fees would allow them to lower their prices. But banks had warned that a limit on what they can charge retailers would force them to cut back on other services, such as free checking and rewards programs. Some might even charge annual fees for debit cards.

The Fed's board of governors sealed the decision with a 4-1 vote. It was "one of our most challenging rule-makings" under the financial regulatory law, Fed Chairman Ben Bernanke said.

Fed Gov. Elizabeth Duke cast the dissenting vote. She said the industry will inevitably find other ways to profit and consumers will bear that cost.

The rule does not apply to credit cards, government-issued debit cards, prepaid cards or cards issued by banks and credit unions with assets of less than $10 billion.

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