US banks may be forced to slash card fees
Investors fear that the industry could lose billions of dollars in revenue.
The proposal would generally limit so-called debit "interchange" fees at 12 cents per transaction. The average interchange fee for all debit transactions was 44 cents per transaction in 2009.
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Hide AdThe banking regulator also sought comment on requiring debit cards to offer multiple networks – allowing the same debit card to be processed over either Visa, MasterCard, or rival payment networks.
The proposal is a victory for retailers who have long lobbied for fee cuts but it also puts heavy pressure on Visa and MasterCard.
One payments industry source had a succinct email response to an inquiry about the Fed proposal: "Ouch."
Visa said it was still reviewing the specific elements of the debit card regulation provisions of the Dodd-Frank Act.
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Hide Ad"Visa ... has concerns that the Federal Reserve's proposal includes artificial caps on debit interchange that do not realistically reflect the value of card acceptance and do not reflect the actual costs of running a secure, reliable and efficient debit network.
"Further, the proposed routing and exclusivity alternatives put retailer profits ahead of consumer protection, choice and convenience," the company said.
MasterCard called the proposal "misguided and anti-competitive".
The sweeping Dodd-Frank financial industry reforms signed into law in July called for new curbs on debit card fees.
The Fed is required by the law to put out a final rule on the fees by April 21 and it would become effective in July.