Debit Card Fees Discussed 

Debit card fees were discussed at a recent House subcommittee hearing, with several members of Congress expressing concern over proposed rules issued by the Federal Reserve last December that would cap debit card transaction fees at 12 cents per transaction. The proposed change would roughly equalize the cost of accepting debit cards and of processing automated check handling (ACH) transactions. Transaction fees for credit cards or non-PIN debit cards would, however, remain higher.

Banking and credit union associations are asking Congress to intervene and halt issuance of a final rule. During the hearings, several members of Congress said they believe that the proposed cap was artificially low because the legislation mandating the rules, the Dodd-Frank bill, required they be based on the “incremental costs” to process debit transactions rather than the “full costs.”

There were also issues with the Congress-mandated fast-tracked timetable. The final rule is due to be published by April 21 and go into effect on July 21.

NAA/NMHC are following the issue, as automated payment fees have created meaningful obstacles to more fully automating rent payments. One major hurdle, the inability to set different fees for different payment options (e.g., cash, debit card, ACH, credit cards) within the same payment channel (e.g., in the office or on a web portal) was resolved by a recent settlement between the Justice Department and Visa and MasterCard. Under that settlement, merchants (including apartment owners) can now differentiate fees/rents at any payment point. It should be noted that the credit card network rules against charges for convenience fees remain unchanged. This part of the contractual agreement between the merchant and the credit card association remains outside the settlement.

In response to the pending Federal Reserve regulations, the banking industry and credit card networks are expected to seek ways to shift card usage from low-fee debit cards to higher-fee credit cards. As part of that effort, they may be more willing to negotiate lower credit card fees with industries like the apartment sector. NAA/NMHC have already held preliminary meetings with representatives from the credit card networks as they consider their options. In the meantime, apartment firms may want to create incentives to encourage greater debit card usage.

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