Debit-Card Fee Caps May ‘Burden’ Latinos, Hispanic Chamber Says

The Federal Reserve’s proposed caps on debit-card interchange fees set to take effect in July may hurt Latino consumers and warrants further study, according to the U.S. Hispanic Chamber of Commerce.

The comments follow assertions by the banking industry that the limits would force people with low incomes to drop checking accounts because of new fees that lenders including Bank of America Corp. (BAC) would impose in response. The National Association for the Advancement of Colored People expressed similar concerns last week.

“I am concerned that without a thorough examination of the unintended effects of this amendment, the Hispanic community, which relies heavily on debit cards, will suffer a significant burden,” Javier Palomarez, the chamber’s chief executive officer, wrote in a letter yesterday to lawmakers.

The so-called Durbin amendment to the Dodd-Frank regulatory overhaul requires the Fed to set debit-card interchange, or “swipe” fees, that are “reasonable and proportional” to the processing costs. The rules may help retailers like Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT) and trim annual revenue by as much as $12 billion for lenders such as JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC)

In December, the Fed proposed capping the fees at 12 cents a transaction, replacing a formula that averages about 1 percent of the purchase price.

Hilary O. Shelton, the Washington bureau director for the NAACP, sent a letter last week to Republican House Speaker John Boehner of Ohio calling for the rule to be “thoroughly and expeditiously reviewed prior to implementation.”

Palomarez wrote in yesterday’s letter that he’s “particularly concerned” that reduced debit-card revenue may prompt banks to limit broader access to debit cards.

‘Adversely Impacted’

“Should this occur, then the 80 million underserved consumers in the United States -- including thousands of Hispanics who use general-use prepaid debit cards today -- would be adversely impacted,” Palomarez wrote in the letter to Boehner, House Minority Leader Nancy Pelosi of California, Senate Majority Leader Harry Reid of Nevada and Senate Minority Leader Mitch McConnell of Kentucky.

Visa Inc. (V) and MasterCard Inc. (MA), the world’s biggest payment networks, set interchange fees and pass the money to card- issuing banks. Shares of both firms plunged more than 10 percent on Dec. 16 after the Fed released its proposal amid investor concern that the caps would damage their business model.

Members of the House and Senate are meeting to draft legislation that would delay the rules, which must be completed by April 21 and take effect by July 21, lawmakers and aides have said.

To contact the reporters on this story: Phil Mattingly in Washington at; Dawn Kopecki in New York at

To contact the editor responsible for this story: Lawrence Roberts at

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