WASHINGTON – In a brazen attempt to manipulate the debit card market, the Federal Reserve Board of Governors has proposed a rule that would allow merchants to choose debit networks for transactions made online and in circumstances where consumers pay without physically presenting their debit cards.
The proposed rule, which has the potential to reduce merchants’ transactional costs and ultimately save consumers money, has been supported by the Justice Department’s Antitrust Division. The division filed a comment in support of the Board’s notice of proposed rulemaking on Debit Card Interchange Fees and Routing, citing the need to promote competition in the debit card industry.
According to the Justice Department, the Durbin Amendment requires issuers to make available at least two independent debit networks on the cards they issue. However, this requirement has not been effective for online and other card-not-present transactions, as many large issuers have not implemented necessary technological changes to permit debit networks other than Visa and Mastercard to process transactions.
As a result, the Justice Department is supporting the Board’s proposed rule, which would clarify that the Durbin Amendment’s two-debit-network requirement applies with equal force to such transactions. The proposed rule has the potential to increase competition by lowering one of many barriers to entry and expansion that new or smaller competitors face in this important segment of the debit card industry.
However, the Justice Department is also encouraging the Board to consider ways to improve upon the proposal, including drafting the proposal broadly enough to capture all card-not-present transactions and actively assessing additional ways the proposed rule may be enhanced to increase competition for debit payment processing.
The Federal Reserve Board of Governors is responsible for prescribing regulations pursuant to the Durbin Amendment, a statute designed to promote competition in the debit card market. The proposed rule has the potential to save consumers money and promote competition in the debit card industry.
Defendant: Federal Reserve Board of Governors
Crime: Debit Card Interchange Fee Manipulation
State: Washington
Year: 2024
Sentence or Outcome: Proposed Rule
Dollar Amounts: $1 trillion (transaction value)
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Key Facts
- State: Federal
- Category: White Collar Crime
- Source: DOJ Press Release â†â€â€
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