U.S. Senate proposing a new financial package…
In an attempt to thwart a repeat of the financial crisis, the U.S. Senate is working on a new package of financial rules. The latest measure would force credit card companies to charge less for debit card purchases than for credit card transactions and allow merchants to offer their customers discounts based on their method of payment. Merchants would be prohibited from placing minimum purchase requirements for the use of a debit card and banks with assets of less than $10 billion will be exempt from the fee requirement altogether. The new regulation would affect 65% of all credit and debit card transactions in the U.S.
According to Sen. Richard Durbin, D-Ill, the sponsor of the bill, consumers will continue to face higher prices without legislative action, and he wants the Federal Reserve to ensure the fees for debit card use are proportional to the costs of processing the transaction. Durbin’s theory is that with lower debit card fees, merchants will offer discounts to their customers.
A major defeat for the banking industry who lobbied hard against the mandate, they say the changes will force consumers to pay more for their cards and result in higher profits for large retailers. The Electronic Payments Coalition, an industry group whose members include Visa, MasterCard and American Express, said the plan would also harm many small banks and credit unions that already lose or barely break even in their card operations. The Independent Community Banks Association argues that large retailers may start accepting only the cheaper cards offered by large banks under the new rules.
The measure passed on a vote of 64-33 and now moves to the House, who passed their own version of regulations that does not include the debit card provision. (It should be noted that a similar proposal that was attached to last year’s credit card regulations failed to pass.)
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