Despite a great deal of resistance, Representative Barney Frank says he will continue to fight to keep caps on so-called debit card "swipe fees."
The rule, proposed by Illinois Senator Dick Durbin, would keep banks from overcharging businesses for debit card transactions and then passing those charges on to the consumer, but the House wants to fight that proposal. According to a report in BusinessWeek, the House version of the bill would exempt government-issued prepaid cards and reloadable prepaid cards from these fee caps. It would also allow the Federal Reserve to take into account the cost of fraud prevention when determining whether swipe fees are "reasonable and proportional."
Visa and MasterCard alone made $19.7 billion on these fees alone last year, which averaged 1.63 percent of the cost of the transaction.
A MarketWatch report said such fees help pay for rewards on some cards, and to help offset the risk that is associated with using credit cards, given the high incidence of credit card fraud across the country. The downside of Senator Durbin’s plan, it said, is that the loss of these fees could mean watered-down rewards programs and even higher fees, leading to growing credit card debt.