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Banks Stand to Lose Billions as Court Slams Fed Swipe-Fee Rule

| Bloomberg BusinessWeek

Madeline Aufseeser, a senior analyst with Boston-based consultancy Aite Group LLC, estimated that the Fed’s current implementation of the Durbin amendment has cost banks about half the $16 billion they once made from debit-card swipe fees each year. They take in an estimated $40 billion from credit card swipe fees, which are unaffected by the Fed rule, she said.

If the Fed responds to the ruling by reverting to its original proposal of 12 cents per transaction, revenue for the top 50 credit-card issuers who use Visa and MasterCard networks and have assets over $10 billion would drop to $4.3 billion per year, Aufseeser calculated.

Banks called on the Fed to head off the decision’s impact.

“We urge the Federal Reserve to pursue all legal means to mitigate the harm this decision will cause to consumers, community banks and all institutions that provide financial services to local communities,” Frank Keating, president of the American Bankers Association, said in an interview. “The Durbin Amendment and the court’s interpretation will have disastrous consequences for the institutions affected and the communities they serve. This result must be reversed.”

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