The Federal Reserve’s proposal to reduce the debit card swipe fees that large banks are allowed per transaction is only a partial victory for consumers, according to NACS.

The Federal Reserve Board of Governors released a proposal on Wednesday to lower the amount that banks can assess for debit swipe fees from 21 cents to 14.4 cents per transaction. The proposed regulation will be open for public comment for 90 days and must be approved by the Board of Governors before becoming final.

“The proposed new rates are an acknowledgement that the rates that were initially set in 2011 are out of line with the costs of processing transactions,” said NACS General Counsel Doug Kantor. “But they still don’t accurately reflect the market, and consumers deserve better.”

In 2010, Congress passed legislation directing the Federal Reserve to adopt regulations requiring that debit card swipe fees—which then averaged about 45 cents per transaction—be “reasonable” and “proportional” to banks’ costs. Regulations released in 2011 allowed banks that have at least $10 billion in assets and follow rates set centrally by Visa and Mastercard to charge up to 21 cents per debit card transaction plus 1 cent for fraud prevention and 0.05% of the transaction amount for fraud loss recovery.

The Federal Reserve’s new proposal also increases the amount for fraud prevention to 1.3 cents and lowers the amount for fraud loss recovery to 0.04 percent. Retailers had pushed to have the extra 1 cent and 0.05 percent for fraud eliminated, arguing that those fees have given banks a windfall since a larger share of liability for fraud shifted to merchants following the widespread adoption of EMV chip cards beginning in 2015. Overall, retailers now pay for most of the fraud, while the banks only pay for 36% of fraud.

The rates are still significantly higher than the average 7.7-cents-per-transaction rate to process debit transactions in 2011. The 21-cent base rate has not been adjusted even though the costs of processing debit transactions have fallen steadily and averaged 3.9 cents per transaction in 2021, according to a new report released by the Federal Reserve.

“It is long past time for the Federal Reserve to do what Congress said to make debit card swipe fees reflect a real, competitive market. Retailers and the consumers who ultimately pay these fees have been overcharged by far too much for far too long,” said Kantor.

There is some other good news in the proposal: Going forward, the rate would be updated every other year by “directly linking” the amount allowed to data on banks’ costs.

The proposed new rates only affect debit swipe fees. Bipartisan legislation introduced in both the United States House and Senate in June seeks to address the broken credit card swipe fee market. The Credit Card Competition Act proposes an open marketplace for credit card processing in which retailers could choose the payment network to handle a transaction.

Credit and debit card swipe fees have more than doubled over the past decade and are now $160.7 billion a year—over $1,000 a year for the average family, according to the Nilson report, which is considered the most trusted source on statistics for the payments industry.

NACS members are encouraged to reach out to their members of Congress and ask that they support the Credit Card Competition Act. NACS makes it easy for retailers and suppliers to send a message to their legislators via the NACS Grassroots Portal.