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Six Questions Surrounding the Interchange Settlement

Members of the Electronic Payments Coalition remain highly confident that the Court will grant preliminary, and ultimately final, approval for the settlement in the merchant class action suit against the payment card industry – and that this represents the end of a long battle and finally puts all the issues raised to rest going forward.  Recent noise in the press, however, has raised a number of questions as to why we remain so confident in this outcome.  This is an interview with Robert Stolebarger, partner at Bryan Cave LLP and antitrust counsel for the Electronic Payments Coalition, where he addresses some of the most commonly asked questions.

Financial Service Associations Letter to Hill on GAO Study

Four financial services associations issued a letter to Congress on the eve of the one year anniversary discussing the contents of a new GAO study about the impact of Dodd-Frank. The study shows that for smaller community banks and credit unions, which were supposed to be “exempted” from the fallout of this legislation, interchange revenue dropped by five percent in just the first three months of implementation, and that was before the network exclusivity and routing provisions took effect in April 2012. These provisions require financial institutions to enable their debit cards with two unaffiliated payment card networks which will likely cause even more substantial reductions in interchange fees to exempt issuers.   The GAO further concludes that even more harm to community banks and credit unions is likely as the marketplace evolves.

Bankrate: Checking Fees Rise to Record Highs in 2012

The survey found that the costs of checking have risen dramatically, with some bank fees rising 25 percent or more. The survey finds that the rise in fees is, in part, a result of recent regulations limiting overdraft fees and capping the cost of debit card interchange fees. According to the survey, only 39 percent of banks offer a checking account with no minimum balance requirement and no monthly checking fee, down from 45 percent in 2011.

2011 FDIC National Survey of Unbanked and Underbanked Households

In June 2011, the FDIC sponsored the second National Survey of Unbanked and Underbanked Households to collect data on the number of U.S. households that are unbanked and underbanked, their demographic characteristics, and their reasons for being unbanked and underbanked. It is hoped that these survey results will help better inform policymakers and the industry about economic inclusion issues, and promote the goal of ensuring that all Americans have access to basic, safe, and affordable bank services.

Pulse: Debit Issuer Study

The 2011 Debit Issuer Study, commissioned by PULSE, finds that small debit card issuers, including community banks and credit unions, on average expect a 73 percent decrease in debit interchange revenue as a result of pending interchange fee rules. While these issuers with less than $10 billion in assets are exempt from the regulations proposed by the Federal Reserve Board, they are critical of the interchange cap and skeptical that the exemption will be effective.

Moody’s Investor Service: New Debit Rules Hurt Banks and Reshape the Payment Processor Market

This report from Moody’s examines the effects of the Durbin amendment on banks and payment processors. The report speculates that Durbin amendment’s reform of debit interchange and routing practices hits banks the hardest and makes payment processing more competitive. Merchant acquirers and retailers are benefiting from the rule changes and there is substantial evidence that they will not pass savings along to consumers. Despite the blow to banks, Moody’s expect them to attempt to offset the lost revenue by raising fees for other products and cutting expenses, though this process will be difficult and the timing is unclear.

Card Hub: Interchange Fee Study

This study has been updated multiple times with new information as the Durbin Amendment made its way through Congress and ultimately took effect on October 1, 2011. On May 1, 2012 the Federal Reserve for the first time announced hard data on the law’s practical effect, and Card Hub’s 2012 Impact Study concluded that the law has ended up costing banks almost $8.4 billion on an annual basis ($8.06 billion for large banks and $329.4 million for small banks).