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Fed issues price-control proposal on card interchange fees

The Federal Reserve recently issued a proposal to implement a provision in the Dodd-Frank Act – the ABA-opposed Durbin amendment – that requires the Fed to set debit-card interchange fees so they are “reasonable and proportional” to the cost of the transaction.

The proposal outlines two alternatives for computing a “reasonable and proportional” fee. Under the first alternative, each issuer would be permitted to determine its maximum allowable fee based on its costs – with a safe harbor of 7 cents per transaction and a cap of 12 cents per transaction. The second alternative simply caps the fee at 12 cents per transaction.

Comments on the proposal are due Feb. 22, 2011. The rule must be finalized by April 21, and will take effect July 21.

Click here to read more about the proposal.

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