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Proposed debit-card rules more ‘draconian’ than expected


U.S. banks could lose billions of dollars in revenues as a result of new debit-card restrictions proposed Thursday by the Federal Reserve, The Wall Street Journal reported.

The restrictions, most of which won’t be finalized until April 21, are intended to cap the amount that card issuers can charge vendors in so-called swipe fees.

Under the proposed rules, banks would face a cap of 7 cents to 12 cents per transaction on interchange fees, which represents as much as an 84 percent decrease from the current average of 44 cents.

That beat analysts’ expectations of a drop of up to 60 percent.

“Nobody expected it to be this draconian,” said David Robertson, publisher of the Nilson Report, a credit-card industry newsletter.

The banks expected to be hardest hit by the proposed rules include Bank of America Corp. and Wells Fargo & Co. Debit interchange fees account for 2.5 percent of those financial institutions’ revenues.

“At this point, it’s premature to speculate on the financial impact,” a Wells Fargo spokeswoman said.

After the proposed changes were publicized yesterday, stocks of debit-card processors MasterCard Inc. and Visa Inc. dropped $25.73, or 10 percent, to $223.49, and $9.75, or 13 percent, to $67.19, respectively.

“This type of price control is misguided and anticompetitive, and in the end is harmful to consumers,” said Noah Hanft, general counsel for MasterCard.

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