(WASHINGTON) - A top Federal Reserve official Thursday acknowledged that banks may turn to higher checking and other fees to make up for a proposed cut to debit interchange fees for retailers that resulted in huge stock cuts for Visa and Mastercard.
Representation for retailers testified Thursday before the U.S. House of Representatives Financial Services Subcommittee on Financial Institutions and Consumer Credit to rally for the proposed cuts, which could cut interchange fees by an average of 73 percent. They called the fees, which are the charge retailers pay for accepting debit and credit cards, a huge cost with no price competition.
“The inability of merchants to go to a competitor bank to get a better deal on swipe fees is simply devastating,” said Doug Kantor, an attorney representing the Merchants Payments Coalition.
Federal Reserve Governor Sarah Bloom Raskin said banks may make up for the higher-than-expected fee decrease by increasing fees in other areas.
“Card issuers may choose to make up their lost interchange fee revenue by imposing higher fees, or reducing rewards programs, for debit card use or for deposit accounts in general. On the other hand, consumers will benefit to the extent merchants pass on their interchange fee savings in the form of lower prices,” Raskin said.
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