Don't count on the Federal Reserve Board issuing final regulations implementing the Durbin Amendment by the April 21, 2011, deadline Congress set under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. After being inundated with more than 11,000 comment letters, Fed Chairman Ben Bernanke said in a recent letter to Congress that staffers need more time to review and consider issues raised by those letters before they can finish the rule-making process.
But hold the applause. Bernanke also said the Fed is committed to having regulations in place before July 21, when the debit-interchange-cap law takes effect, according to news service reports. The letter was sent to leaders of the House Financial Services and the Senate Banking committees.
The Durbin Amendment, among other things, instructs the Fed to issue rules to cap debit card interchange fees charged merchants at rates deemed "reasonable and proportional" to costs incurred by issuers. Community banks - those with assets below $10 billion - are exempt from the legislation. So are prepaid debit cards.
A set of proposals for implementing Durbin was drafted by the Fed's staff and released for public comment in late December; interested parties had until February 22 to submit comment letters.
They proposed two scenarios for capping debit card interchange, either of which would result in a 70 percent hit to issuing banks' debit interchange revenues, based on 2010 assessments.
Opponents argue the proposal could have serious unintended consequences for consumer spending and bank balance sheets.
It also could stymie efforts to bank the unbanked by forcing banks to raise other fees, thereby making checking accounts unaffordable to more Americans, several economists have warned.
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