Updates on the financial reform bill:
On July 21, 2010, President Obama signed the vigorously debated and much scrutinized Restoring American Financial Stability Act of 2010 into law. For the payments industry, the law's key component is the Durbin Amendment, which, among other provisions, gives the Federal Reserve the power to cap interchange rates on debit card purchases at a level commensurate with the costs of processing those transactions.
Yet a number of questions loom about how, precisely, the amendment's different provisions will be defined and what the ramifications of its enforcement will be.
In her opening address at the Midwest Acquirers Association meeting held in Schaumburg, Ill., from July 21 to 23, Electronic Transactions Association President Holli Targan said the Fed isn't happy that this regulatory task has been foisted upon it because it doesn't know how the industry works.
Among the amendment's components is the stipulation that the Fed cap debit interchange at a level that's "reasonable and proportional" to the processing costs incurred by issuing banks, including costs that go toward fraud management. The cap will apply only to debit cards issued by banks with more than $10 billion in assets.
The law also requires that merchants be connected to at least two networks for debit processing, allowing them to route each debit purchase to the one with the lower interchange rate. Additionally, the law allows merchants to set minimum purchase amounts of up to $10 for the use of payment cards and to offer discounts to customers who use certain payment types over others, for example, cash instead of credit or debit, and debit instead of credit.
The new rules are scheduled to take effect 12 months after the bill's passage, which puts them on track for implementation in July 2011. From http://www.greensheet.com
