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HARTFORD – Today ConnPIRG applauded the proposed regulations of the Federal Reserve Board of Governors to decrease swipe fees on debit card transactions. Consumers however, hope to see the Fed adopt a much greater reduction in interchange fees in the final rule due in April, 2011.
Last year, Congress enacted provisions in the Dodd-Frank Act to require the Federal Reserve Board to adopt regulations to reduce the level of swipe fees that are paid by merchants to banks to handle debit card transactions. The Fed’s proposed regulations recognize that interchange costs negatively affect consumers, especially lower-income consumers, resulting in higher prices for everyone.
“The proposed regulations will benefit consumers by lowering the billions of dollars annually in non-negotiable swipe fees paid by merchants to large banks and the dominant credit card networks,” said Ed Mierzwinski, ConnPIRG's Federal Consumer Advocate. “These changes will lower the prices of everyday goods for all consumers including cash customers.”
Interchange fees in 2008 topped $48 billion dollars, according to the Food Marketing Institute, which is 300 percent of what they were in 2001—even as the costs of card processing and issuance have fallen. As interchange fees have increased, retail prices have been inflated by billions of dollars of interchange fees, which are used to subsidize rewards programs, promotions, and riskier credit underwriting for credit card users. The fees are paid by all Americans, regardless of whether they use credit, debit, checks or cash.
"The Fed action will give millions of consumers a needed break. Lower swipe fees mean lower prices at the checkout counter. We welcome the Fed's continued attention to making sure consumers are protected under the swipe fee regulations," said Mierzwinski. “We now must evaluate the proposed rule to make sure it is strong as possible.”
There will be a 60 day comment period on the proposed rules. The Federal Reserve Board is expected to issue a final rule by April 21, and the rule will go into effect June 21, 2011.
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