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Final Debit Interchange Fees Anger Retailers

Stocks in this article: MA V

Business owner Nick Diambre, of Oasis in Portland, Maine, employs about 20 people. He says he pays between $15,000 to $17,000 a year in swipe fees, which takes away from other investments, such as hiring and infrastructure.

"For a small business that is truly holding on by their fingertips ... it's a real blow," Diambre said on the call. "It's better than the 44 cents, but it's not the 12 cents that we were all hoping for and, frankly, banking on to keep the business healthy."

"The list of what we can't do because of the higher debit interchange cap is the real issue here," Diambre writes in a follow-up email. "We can't upgrade, we can't contribute to charities, we can't better our community and to be honest, the difference could mean that I can't afford to hire more staff."

The rule takes effect Oct. 1. The original implementation date was set for next month.

Debit card (as well as credit card) interchange fees are established by payment card networks such as MasterCard (MA) and Visa (V). Merchants ultimately pay those fees to card issuers (banks) for each electronic transaction. (Issuers with less than $10 billion in assets are exempt from the new fee standards.)

>>>Debit Card Rule Delay Threatens Small Business

The rule assesses whether debit card interchange fees are "reasonable and proportional" to issuer costs incurred by for the transactions. As part of the Dodd-Frank financial reform legislation passed in July, the Fed was given authority to set "reasonable and proportional" debit interchange fees as put forth in a last-minute amendment by Sen. Richard Durbin, D-Ill.

The Fed also approved an interim final rule to allow for an "upward adjustment" of a maximum of 1 cent to an issuer's debit card interchange fee if the issuer "develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the interim final rule."

What it means is that the maximum debit interchange fee issuers can charge is approximately 24 cents for the average debit card transaction, which is valued at $38.

--Written by Laurie Kulikowski in New York.

To follow Laurie Kulikowski on Twitter, go to: http://twitter.com/#!/LKulikowski

To submit a news tip, send an email to: tips@thestreet.com.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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