Federal Reserve Chairman Ben S. Bernanke told lawmakers today that the central bank would miss the April deadline for a rule capping debit-card “swipe” fees, after receiving an “extraordinary volume” of detailed comment letters on its preliminary proposal.
“The issues raised by the comments are complex and difficult and are significant to the payments system, its providers and its users,” Bernanke wrote in a letter today to House and Senate lawmakers, citing more than 11,000 letters filed during the comment period.
Bernanke, who has suggested the rule will be difficult to implement, said the Fed remains “committed to completing the rulemaking” for the cap provision before the July 21 deadline mandated by last year’s Dodd-Frank financial-regulation law.
Bernanke’s letter was sent to the chairmen and ranking minority members of the House Financial Services Committee and the Senate Banking Committee.
The Fed in December proposed capping debit-card interchange fees charged to merchants at 12 cents a transaction, compared with the current formula that averages 1.14 percent of the purchase price, or about 44 cents. The proposal, which may cut as much as $12 billion in revenue from large lenders like Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM), set off a lobbying battle between banks and retailers.
Shares of San Francisco-based Visa Inc. (V) and MasterCard Inc. (MA), which set the fees and pass the money to card-issuing banks, fell more than 10 percent after the Fed’s plan was released Dec. 16 amid investor concern that the caps will damage their business model.
Bipartisan groups of Senate and House lawmakers this month proposed legislation to prevent the rule from taking effect July 21. Senator Jon Tester, a Montana Democrat and lead proponent of the Senate bill to delay the proposal for two years, said he’s concerned that an exemption for banks with assets of less than $10 billion would be ineffective.
Retail groups who favor lower interchange fees said the delay indicates that the rulemaking process is working and should be allowed to continue.
“Chairman Bernanke’s letter is proof-positive that the Federal Reserve is approaching this rulemaking thoughtfully,” said Brian Dodge, a spokesman for the Retail Industry Leaders Association, a trade group representing companies like Wal-Mart Stores Inc. (WMT), Home Depot Inc. (HD) and Target Corp. (TGT) “Congress should not step in and interfere with what is clearly a thorough fact- based process.”
Banks and credit unions said the delay suggests the opposite, that lawmakers should postpone the rule.
Bill Cheney, president of the Credit Union National Association, said in a statement that “the Fed’s admission that it cannot meet the deadline imposed on it by Congress is further proof that Congress must take action now to postpone this entire matter.”
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