Visa (V), Mastercard (MA) Jump on Debit Card Fee Delay Expectations

Shares of Visa (NYSE:V) and Mastercard (NYSE:MA) have received a boost on expectations the proposed rules which would limit the amount banks can charge for debit-card swipe fees will be delayed.

Federal Reserve Chairman Ben Bernanke recently stated in a letter to Congress that it's very improbable that in the next Federal Reserve meeting they'll be able to meet the deadline of April 21 for the final rules concerning the fees to be put in place.

Growing opposition over limiting the fees is slowing down the process and looking increasingly questionable as to whether they'll become part of the way banks will have to do business.

Visa closed Wednesday at $74.23, gaining $2.03, or 2.81 percent. Mastercard closed at $253.66, up $1.95, or 0.77 percent.

Wells Fargo's (WFC) Stumpf Lashes Out at Debit Card Fees Limit

Saying the proposed limits on debit card fees "make no sense," and distort free-market economics, Wells Fargo (NYSE:WFC) CEO John Stumpf blasted the idea in an annual letter to shareholders.

He rightly says, “What’s next? Will the government require car dealers to sell a new vehicle for $5,000 or grocers a gallon of milk for 50 cents?”

“Banks should be fairly compensated for the value that debit cards create for merchants and their customers by reducing fraud risk and the cost of carrying cash or handling checks,” Stumpf wrote. “An 80 percent cut in this fee wouldn’t even enable us to cover the cost of providing the service.”

Issuers including Bank of America Corp. (NYSE:BAC) and JPMorgan (NYSE:JPM) could lose as much as $12 billion in annual revenue under the change, scheduled to be implemented July 21.

The Federal Reserve rule, required as part of the Dodd-Frank Act approved in 2010 by a Democrat Congress and signed by President Barack Obama, would cap the fee card networks can charge merchants at 12 cents for each transaction, replacing a formula that had averaged 1.14 percent of the purchase price.

Some lawmakers have introduced bills to hold off on the change for a couple of years until it can be examined more closely. There's really nothing to examine, it needs to be excised from the bill altogether.

Bank of America (BAC), JPMorgan (JPM), Citigroup (C) Get "Swipe" Rule Reprieve

Major American bankers like Bank of America (NYSE:BAC), JPMorgan Chase & (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are getting a temporary break on the proposed cap debit-card “swipe” fees, as a group of nine Senators signed onto legislation which will delay the enactment of the proposal for a couple of years.

Senator Jon Tester, a Montana Democrat, today introduced the bill that would put off implementation of the rule, which has pitted lobbyists for retailers Wal-Mart Stores Inc. (NYSE:WMT) and Target Corp. (NYSE:TGT) against financial-industry groups.

The rule, developed by the Fed under the mandate of the Dodd-Frank regulatory overhaul, would allow card networks to charge retailers a maximum of 12 cents per transaction. Issuers could lose $12 billion in annual revenue under the change.

“We need to understand that we’re not repealing this rule,” Tester said in an interview. "We’re going to delay it, we’re going to study it and we’re going to take a look at it to make sure it is what it is advertised as.”

Tester’s legislation would delay the Fed rulemaking for two years. During that time, a joint study of the rule’s impact would be conducted by the Fed’s board, the chairman of the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the chairman of the National Credit Union Administration.

House Republicans are close to introducing a similar bill that would delay the proposal for a year and would require the same agencies to conduct the impact study.




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