Federal Reserve Chairman Ben Bernanke announced on Tuesday that he would not be able to meet the April 21 deadline for announcing the Fed’s decision on interchange fee regulation. Their Durbin Amendment proposals generated over 11,000 comments, said Bernanke in letters to the House Financial Services and Senate Banking Committees.
“We believe the information provided in these comments is important for assessing fully the effect of the proposed rule on the U.S. payments system and its users and providers,” he wrote.
However, Bernanke assured Congress that he still planned to meet the deadline for implementing the rules on July 21st, implying that the result of the delay would simply be a shorter time between announcing and enforcing interchange fee regulation. Preliminary rules issued in December called for a reduction in debit “swipe” fees of nearly 75%, sparking outrage from credit card networks like Visa and applause from consumer advocacy groups.
The Electronic Payments Coalition, which represents banks and card networks, was thrilled about the announcement, praising Bernanke for taking his time on what the lobbying group called a complex and far-reaching issue.
Supporters of the Durbin Amendment, surprisingly, were largely accepting of the Fed’s delay. The National Retail Federation, a group representing merchants that strongly advocates for interchange fee regulation, reaffirmed their belief that the “agency will complete final swipe-fee reform regulations…this summer as scheduled.” And Senator Dick Durbin (D-Illinois) himself said in a statement on Monday,
“The Federal Reserve is working diligently…[the] new interchange regulations will take effect on July 21st [as planned.] On that day, small businesses will finally see relief from years of high fees that are unilaterally set by Visa and MasterCard on behalf of the nation’s biggest banks, and consumers will begin to benefit from increased competition, discounts, and lower prices.”
The effect of the delay is unclear, especially after Bernanke reiterated his commitment to the July 21st implementation deadline. Banks, card networks and credit unions are lobbying hard to change, dilute or delay the bill, and Senator John Tester, Republican of Montana, has introduced a bill to delay reform by two years. Still, Bernanke’s statements seem to indicate that the Fed will implement some reforms, though maybe to a lesser extent.
Visa, a major card network and half of the plastic-processing duopoly, saw its stock price rise sharply after hours yesterday and closed up 2.81% for the day. MasterCard, the other half, also rose.