Analysts say debit fee rules might apply to PayPal

A payment service some consumers use to avoid taking on credit card debt when making online purchases could soon face similar restrictions as major financial institutions.

Some analysts now believe that PayPal, the popular online payment service owned by auction site eBay, could also be affected by the proposed debit card interchange fee restrictions, according to a report from CNBC. This is likely because the law that created the proposed rule – the Durbin Amendment to the Dodd-Frank Act – defines what constitutes a debit transaction rather vaguely.

“If the final rules are as broad as the draft rules, PayPal accounts could easily end up being defined as debit cards,” FBR Capital Markets analyst Edward Mills recently wrote, according to the news network.

PayPal, which currently constitutes about 40 percent of all of eBay’s revenues, enjoyed a 23 percent year-over-year growth at the end of the first quarter, the report said. As a consequence, the company could also stand to lose a significant amount of revenues to the new rules.

Lobbyists for the banking industry say the rule would cut financial institutions’ revenues by as much as several billion dollars per year.

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