Article

Proposed Federal Reserve Board rules on debit card interchange would not affect ATM interchange

Analysts say ATM fees would not be subject to the legislation.

December 20, 2010

The Federal Reserve Board's proposed rule that would establish debit card interchange fee standards would not affect ATM interchange, say industry experts.

"The regulation of debit interchange under the Dodd-Frank Wall Street Reform and Consumer Protection Act expressly excludes ATM interchange of the proposed rules," said Mike Lee, CEO of the ATM Industry Association (ATMIA).

Gil Luria, senior vice president of Equity Research and Financial Technology at Wedbush Securities, agrees. "Since ATM fees are charged between banks and not by banks to retailers, they are not subject to this legislation," he said.

In its 176-page notice of proposed rule making that was issued Dec. 16, the Federal Reserve Board, however, requested comment whether ATM interchange should be included.

"The Board requests comment on whether ATM transactions and ATM networks should be included within the scope of the proposed rule," the Federal Reserve said. "Although the statute does not expressly include ATM transactions within its scope, definitions of debit card, electronic debit transaction and payment card network could be read to bring ATM transactions within the coverage of the rule. Specifically, most ATM cards can be used to debit an asset account. It also could be argued that an ATM operator accepts the debit card as form of payment to carry out the transaction, so the ATM network could be covered by the statutory definition of a payment card network."

The Federal Reserve Board noted that the term "interchange transaction fee" is defined as a fee charged for the purpose of compensating the issuer. The Board said the interchange fee for ATM transactions is paid by the issuer and flows to the ATM operator.

"Thus, the proposed interchange transaction fee standards would not apply to ATM interchange fees and would not constrain the current level of such fees," the Federal Reserve Board said.

Luria said there have been other attempts to legislate ATM fees and there may be more in the future.