Story updated with a statement from the ABA.



) -- Shares of


(MA) - Get Report



(V) - Get Report

plummeted Thursday afternoon after the

Federal Reserve

issued two alternative fee structures in determining "reasonable and proportional" debit interchange fees -- each of which suggesting a fee cap of 12 cents per transaction.

MasterCard shares were falling 9.5% to $225.67; Visa shares were down 11% to $68.38.

American Express

(AXP) - Get Report

shares were also falling even though the card company does not offer a debit card.

According to a staff proposal recommended to the Fed, the first structure would use issuer-specific standards, a cap and a 7-cent safe harbor, while the second alternative uses only the cap.

The average interchange fee for all debit transactions in 2009 was 44 cents per transaction, or 1.14% of the transaction amount,


cited the Fed.

Analysts said leading up to the meeting that the

financial impact of the changes is likely to be manageable

on banks and payment networks - at least in the near term.

"The rules proposed today are the result of retailers' efforts to get Congress to interfere in market pricing, and will result in diminished revenue that banks currently use to fight fraud, make loans, and provide low-cost basic banking services," said American Bankers Association President Edward Yingling in a prepared statement. "They will also discourage further innovation in the payments system."

Final rules for the interchange regulation are due in April 2011, with a set date to become effective of July 2011.

-- Written by Laurie Kulikowski in New York.

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Laurie Kulikowski


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