Fed proposes 12-cent cap on merchant debit fees

NEW YORK (AP) — The Federal Reserve is proposing a 12-cent cap on the fees merchants pay for debit card transaction processing, a limit that could sharply cut into the revenue of major banks and card networks like Visa Inc. and MasterCard Inc.

Such a cap would, however, help merchants by replacing the current system, where they generally pay between 1 percent and 2 percent of the dollar value of each transaction.

Fed staff members said consumers would not likely see a cap translate into lower prices except in some highly competitive markets, and may result in banks cutting back on debit card reward programs.

The proposal, which must be finalized by April 21, is being made to enact a provision of the financial regulatory overhaul bill that became law in July.