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WASHINGTON, D.C. -- Seven months after reforms went into effect, the sky has not fallen on small banks and credit unions, according to Federal Reserve data.
"Just as reform advocates argued and Congress intended, today's data confirms that small institutions are unaffected by swipe fee reform," said Douglas Kantor, counsel to the Merchants Payments Coalition. "The gloom-and-doom predictions of reform opponents have proved false."
The news comes one year after intense debate and lobbying over swipe fee reform pitted the banking industry against the retail industry. One argument often heard from banking insiders was that new regulations -- which ultimately capped the debit card transaction fees at 21 cents per transaction -- would hurt community banks and credit unions. This was despite a provision in the regulations that would exempt institutions with assets less than $10 billion.
The Federal Reserve was directed by the Durbin Amendment, part of the Dodd-Frank Wall Street Reform Act, which required that debit card swipe fees be "reasonable and proportionate" to the actual cost of processing a transaction. The regulations apply only to debit cards, not to credit cards or gift cards, as CSNews Online previously reported.
The Fed report shows the average swipe fee on a purchase for these small institutions was 43 cents in the fourth quarter, the same as it was in 2009. For large banks, though, the average dropped to 24 cents. That is benefitting consumers when they buy things every day, according to the Merchants Payments Coalition.
"While problems remain, swipe fee reform has significantly improved the debit market, resulting in countless benefits for small businesses and consumers," Kantor added. "The intense competition that exists among merchants means consumers are winning with swipe-fee savings."
The Fed data comes almost three months after a similar report in American Banker found earnings at banks with assets of less than $10 billion appeared to have been entirely untouched by the cap in the first quarter since its Oct. 1 implementation. Revenue from swipe fees at banks identified as exempt by the Federal Reserve rose a few tenths of a percentage point from the third quarter to about $507 million in the fourth quarter, according to regulatory financial reports in early February.