By Andy Sullivan
WASHINGTON, June 21 (Reuters) - Large banks appeared likely on Monday to face new limits on debit-card transaction fees as a key U.S. senator said he had reached a deal to include the provision in an overhaul of financial regulations.
But card networks like Visa Inc and MasterCard Inc scored a win as the new deal scales back the limits on fees they would have faced under legislation that passed the Senate last month.
Democratic Senator Dick Durbin said his compromise is likely to be accepted by a joint Senate-House of Representatives committee that is hammering out a final version of the legislation, which aims to avoid a repeat of the financial crisis of 2007-2009.
The debit-card transaction fees, also known as interchange fees, are among the disputes that negotiators from the House and Senate hope to resolve this week so they can send a final version of the regulatory overhaul to President Barack Obama to sign into law by early July.
The deal appears to ensure that the committee will quickly resolve the issue when it meets on Tuesday.
'Interchange is now basically done,' wrote Concept Capital analyst Chris Krueger in a research note. 'Game over.'
Retailers, restaurants and other merchants have long complained that card networks and issuers charge them excessive fees to process their transactions.
The Senate-passed version of the bill would authorize the Federal Reserve to set debit-card fees according to the cost of handling them, which could dramatically shrink the $48 billion that merchants say they paid in interchange fees in 2008.
The United States has some of the highest interchange rates in the world.
Banks and card issuers say the clampdown would benefit merchants at the expense of consumers, who could pay higher prices or see a reduction in banking services.
Major credit-card issuers include Bank of America Corp. , JPMorgan Chase & Co, Citigroup Inc and Capital One Financial Corp.
Banks with less than $10 billion in assets would be exempt. Credit-card fees would face no such limits.
The House bill contains no restrictions, and banks have been lobbying furiously to keep them out of the final version.
Durbin's new deal would exempt the fees that Visa and MasterCard charge banks. The Fed would be allowed to ensure that the networks don't use the exemption to pass revenue on to card issuers.
That's a 'significant win' for the two card networks, whcih together control 80 percent of worldwide electronic transactions, said James Ellman, president of financial services hedge fund Seacliff Capital.
Share prices of both Visa and MasterCard, which had fallen nearly 10 percent since Durbin introduced his proposal in early May, rose on Monday on news of the deal.
Visa closed up 5.0 percent at $80.90 and MasterCard closed up 4.2 percent at $223.34.
MasterCard said it was still concerned by the proposal; Visa declined to comment.
The American Bankers Association said it was disappointed in the new proposal and urged lawmakers to reject it.
The Retail Industry Leaders Association, which represents merchants, praised the compromise and said it retained the essential elements of Durbin's original proposal.
Durbin's new deal would also exempt government cards used to administer food aid, unemployment insurance and other benefits, as long as 'abusive' fees are not charged. Reloadable prepaid cards, used by consumers who do not have bank accounts, also would be exempt.
The deal also would direct the Fed to take anti-fraud costs into consideration when setting transaction fee levels.
The measure would let merchants give cash discounts to customers who use one type of card over another, or who pay by cash or other means.
(Additional reporting by Maria Aspan; Editing by Leslie Adler) Keywords: FINANCIAL/REGULATION DEBIT (andy.sullivan@thomsonreuters.com; +1 202 898 8391; Reuters Messaging: andy.sullivan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, June 21 (Reuters) - Large banks appeared likely on Monday to face new limits on debit-card transaction fees as a key U.S. senator said he had reached a deal to include the provision in an overhaul of financial regulations.
But card networks like Visa Inc and MasterCard Inc scored a win as the new deal scales back the limits on fees they would have faced under legislation that passed the Senate last month.
Democratic Senator Dick Durbin said his compromise is likely to be accepted by a joint Senate-House of Representatives committee that is hammering out a final version of the legislation, which aims to avoid a repeat of the financial crisis of 2007-2009.
The debit-card transaction fees, also known as interchange fees, are among the disputes that negotiators from the House and Senate hope to resolve this week so they can send a final version of the regulatory overhaul to President Barack Obama to sign into law by early July.
The deal appears to ensure that the committee will quickly resolve the issue when it meets on Tuesday.
'Interchange is now basically done,' wrote Concept Capital analyst Chris Krueger in a research note. 'Game over.'
Retailers, restaurants and other merchants have long complained that card networks and issuers charge them excessive fees to process their transactions.
The Senate-passed version of the bill would authorize the Federal Reserve to set debit-card fees according to the cost of handling them, which could dramatically shrink the $48 billion that merchants say they paid in interchange fees in 2008.
The United States has some of the highest interchange rates in the world.
Banks and card issuers say the clampdown would benefit merchants at the expense of consumers, who could pay higher prices or see a reduction in banking services.
Major credit-card issuers include Bank of America Corp. , JPMorgan Chase & Co, Citigroup Inc and Capital One Financial Corp.
Banks with less than $10 billion in assets would be exempt. Credit-card fees would face no such limits.
The House bill contains no restrictions, and banks have been lobbying furiously to keep them out of the final version.
Durbin's new deal would exempt the fees that Visa and MasterCard charge banks. The Fed would be allowed to ensure that the networks don't use the exemption to pass revenue on to card issuers.
That's a 'significant win' for the two card networks, whcih together control 80 percent of worldwide electronic transactions, said James Ellman, president of financial services hedge fund Seacliff Capital.
Share prices of both Visa and MasterCard, which had fallen nearly 10 percent since Durbin introduced his proposal in early May, rose on Monday on news of the deal.
Visa closed up 5.0 percent at $80.90 and MasterCard closed up 4.2 percent at $223.34.
MasterCard said it was still concerned by the proposal; Visa declined to comment.
The American Bankers Association said it was disappointed in the new proposal and urged lawmakers to reject it.
The Retail Industry Leaders Association, which represents merchants, praised the compromise and said it retained the essential elements of Durbin's original proposal.
Durbin's new deal would also exempt government cards used to administer food aid, unemployment insurance and other benefits, as long as 'abusive' fees are not charged. Reloadable prepaid cards, used by consumers who do not have bank accounts, also would be exempt.
The deal also would direct the Fed to take anti-fraud costs into consideration when setting transaction fee levels.
The measure would let merchants give cash discounts to customers who use one type of card over another, or who pay by cash or other means.
(Additional reporting by Maria Aspan; Editing by Leslie Adler) Keywords: FINANCIAL/REGULATION DEBIT (andy.sullivan@thomsonreuters.com; +1 202 898 8391; Reuters Messaging: andy.sullivan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.