| January 24, 2012

National credit card fee limit may be imposed

A private suit between millions of retailers all across the nation and some of the country’s largest credit card lenders and payment processors could lead to billions in settlements and a new limit on the fees charged to merchants for accepting a credit card purchase.

The antitrust suit, which goes to trial on Sept. 12, 2012, and was filed by retailers against financial giants like Visa, MasterCard and 13 of the nation’s largest banks, says that these companies charge businesses too much for processing credit card transactions, according to a report from CNBC. Consequently, analysts say that not only could the judge’s decision lead to a settlement of potentially billions of dollars (some guess it could be as high as falling into the hundreds of billions), but may also result in the creation of what is essentially a federal cap on credit card processing fees.

Currently, businesses large and small pay the same credit card transaction fees, usually between 1.75 and 2 percent of a purchase’s total value, the report said. But some analysts warn that the judge could institute a new credit card swipe fee limit of as little as 0.5 percent of a purchase value. That’s equal to the rate charged by payment processors in Australia, but higher than those in the European Union, which has a credit card swipe fee cap of 0.3 percent.

Such a change would likely be extremely costly to major banks, with some projected to lose more than $3 billion annually if credit card swipe fees were to fall by 75 percent or so, the report said. That’s in addition to the fee limits on debit cards instituted by lawmakers in July 2011.

Visa and MasterCard put higher swipe fees for credit cards into place after the implementation of the Durbin Amendment to the Dodd-Frank Act, the report said. This federal law capped debit card transaction fees at just 22 cents per purchase, down from the previous average, based on purchase price, of 44 cents. Originally, though, it was slated to be set at just 12 cents per purchase.

Many of the nation’s largest financial institutions also found ways to staunch the monetary pain of higher debit card swipe fees by introducing new fees for popular banking services or increasing those that already existed.

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