AmEx Falls as Credit-Card Fees May Be ‘Next Target’
AmEx Falls as Fees May Be 'Next Target'
Jonathan Fickies/Bloomberg
American Express is the biggest credit-card issuer by purchases.
American Express is the biggest credit-card issuer by purchases. Photographer: Jonathan Fickies/Bloomberg
American Express Co. declined the most in the Dow Jones Industrial Average after Stifel Nicolaus & Co. said proposed federal caps on debit-card fees may be followed by similar cuts for credit cards.
The shares dropped $1.51, or 3.4 percent, the most in more than two months, to $42.50 at 4:15 p.m. in New York Stock Exchange composite trading. AmEx has gained 4.9 percent this year.
The Federal Reserve last week proposed cutting “swipe” fees, or interchange, that merchants pay to accept debit cards by up to 84 percent. That will give merchants more incentive to steer consumers away from New York-based AmEx’s higher-cost credit and charge cards, said Chris Brendler, a Stifel analyst, in a note to clients today. He changed his recommendation for the stock to “hold” from “buy.”
“We are increasingly convinced that credit interchange will inevitably be the next target,” he wrote. “The now- significant disparity in payments’ costs greatly increase the risk.”
The Fed proposals were prompted by the Dodd-Frank regulatory-overhaul legislation, which President Barack Obama signed in July. The measure calls for the Fed to set interchange fees that are “reasonable and proportional” to the cost of processing debit transactions.
Susan Stawick, a spokeswoman for the Fed in Washington, declined to comment.
Proposals for Credit Cards
The payments industry has so far escaped attempts in the U.S. to regulate interchange on credit cards, which average about 2 percent per transaction, saying the fees are needed to compensate banks for the risk of lending money. That argument isn’t relevant to debit cards, which deduct funds held in consumer checking accounts.
Visa Inc., the world’s biggest payments network, plunged 17 percent last week, and No. 2 MasterCard Inc. fell 13 percent, as the Fed proposed capping debit interchange at 12 cents per transaction. AmEx, which doesn’t issue debit cards, charges retailers who accept its credit cards an average of 2.56 percent of the purchase price, the lender said in its third-quarter financial supplement.
American Express, the biggest credit-card issuer by purchases, is fighting a federal antitrust lawsuit that claims the company’s contracts unfairly prohibit retailers from steering customers to cheaper card brands. Visa, based in San Francisco, and Purchase, New York-based MasterCard said in October they agreed to settle the Justice Department complaint.
To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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