FRB Studies Debit Card Fees

Congress has asked the Federal Reserve to study the disclosure of fees imposed by account-holding institutions on debit cards issued to consumers. The primary concern is the imposition of fees when debit cards are used at point-of-sale transactions and the fee may not be known to the consumer until well after the transaction.

Consumers have raised concerns that the trend toward fee income is hitting consumers who use debit cards at point-of-sale but the consumers only learn about the fee in their statements. This is because Regulation E's disclosure requirements don't (yet) reach the point-of-sale situation. ATM disclosures, on the contrary, occur at or before the transaction.

The FRB is seeking information in the comment period that will help it design and carry out the study. Specific questions include:

• What are the amounts of fees imposed by the account-holding institution for on-line and off-line point-of-sale transactions?
• How are such fees collected and paid?
• Who receives the fee or a portion of the fee?
• What does the institution earn in point-of-sale fees for specific periods of time?

Although not specifically asked, the Board will definitely be looking at ways to make consumers aware of the fees before completing the transaction. This is your opportunity to make suggestions on disclosure approaches that you consider appropriate - and affordable.This is yet another example of how fee income approaches can generate more compliance rules. Comments for the study are due by July 23, 2004.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 5, 3/04