Which merchants will receive the new low debit fee rates? This video provides a detailed look at rate differences and how to examine your merchant agreement schedule A and statement. While all merchants qualify for them, only a fraction will actually have debit discounts passed down from their processor. Will you be one of them? Pull out your merchant statement, then watch the video so you can compare data.
What is the value of pinless debit in a post Dodd-Frank / Durbin Amendment environment? It’s too soon to tell. The intracacies of debit fees are still being worked out. Even though there is a debit fee limit on what non-exempt card issuing financial institutions can collect, there are many details still being worked out.
Merchants have yet to see the final impact on what their merchant processor will charge them, and what interchange and debit network fees for exempt card issuing banks will be. Additionally, the new federal legislation is still lin flux. Dodd-Frank created a framework for new regulations to be created. We can expect more regulations to come.
Due to significant pending legislative updates and marketplace changes affecting debit fees, including the Durbin Amendment and interchange updates, we recommend holding off on any business changes for the purpose of acquiring pinless debit until after January 1, 2012. Quite simply, the benefits of pinless debit are too cloudy for the future and merchants would probably be better off investing resources in other areas until more information is known.
If you were thinking of adding pinless debit, what are the most important reasons for you to do so?
The semi-annual Visa and MasterCard interchange update for October 2011 is coming soon. Merchants can expect debit interchange modifications in support of the Dodd-Frank Wall Street Reform and Consumer Protection Act in addition to other interchange changes.
As a review, there will be two types of debit interchange- regulated and non- regulated depending on whether the card issuing bank is exempt or not. A Card Issuing Bank is considered nonexempt from the regulated debit interchange rates when the banks assets, together with its affiliates, exceed $10 billion. Under the law, the maximum interchange fee that a non exempt card issuer may receive for an electronic debit transaction (signature and pin debit) will be $0.21 per transaction, plus 5 basis points. This provision is effective on October 1, 2011. That is not the maximum merchants will pay to processors, just the maximum the card issuing bank can receive.
The Board also approved an additional $0.01 adjustment towards the issuer’s debit card interchange fee if the issuer develops and implements policies and procedures designed to achieve the fraud-prevention standards outlined in the interim final rule, which is still open for public comment until September 30. Banks will likely quickly qualify for the extra $.01 as they try to eek out as much as they can under the new regulation.
For merchants to receive the new non-exempt debit rate:
- The merchant must have a price plan ( schedule A) with pass through interchange indicated.
- The merchant processor must pass on the savings.
If you’re not sure whether you can qualify for new interchange rates, contact us for a free consultation. We’ll need to see a merchant statement and a copy of your contract pricing, usually with “Schedule A” at the top. A proposal you received is not adequate for review.