New Rules on Debit-Card Processing Start to Pinch Small Banks and Credit Union

Washington Post
December 31, 2012
Harrison, J.D.

Financial reform laws have cut into debit-card processing revenue for community banks and credit unions, these institutions are reporting. This contrasts with reports by the Federal Trade Commission and the Government Accountability Office, which found that a provision of the Wall Street reform law has fulfilled its purpose and protected small banks from losing revenue. The provision exempted smaller financial institutions from lowering their card processing fees, or “swipe fees," but capped them for large banks in October 2011. Because of the rule, regulators say, credit card companies created a two-tiered pricing system where small banks can continue charging customers higher rates for using their debit cards. Community bank and credit union executives, however, say otherwise. Local banking executives expect the revenue decline to continue, which could drive community banks and credit unions to levy new fees and reduce free services -- a move that larger banks have been criticized for making.
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