Debit-Card Fee Survives, Russian Taxes, Libor Reform: Compliance
(Bloomberg) — Retailers will have to live with a U.S. regulation they say lets banks overcharge merchants by $3 billion a year.
The U.S. Supreme Court, without comment, left intact a Federal Reserve rule governing how much banks can collect for debit-card transactions. The retail industry argued the regulation didn’t go far enough in capping swipe fees at 21 cents per transaction.
The use of debit cards has soared in the last decade. Consumers used them for 47 billion transactions in 2012, according to federal statistics.
“The cumulative financial impact of the rule is massive,” the appeal argued. The retail group was led by NACS, formerly known as the National Association of Convenience Stores.
The rebuff is a victory for Bank of America Corp. and Wells Fargo & Co., the top U.S. debit-card issuers, preserving a multibillion-dollar revenue stream for the industry. The largest banks earn as much as 5 percent of their revenue from card fees. The rejection also benefits the leading debit-processing networks, Visa Inc. and MasterCard Inc.
The Fed rule is a product of the 2010 Dodd-Frank financial- reform law, which told the board to set limits on what are known as interchange fees. Those fees averaged 44 cents in 2009, and the Fed originally proposed capping them at 12 cents.
After a lobbying campaign by banks and payment networks, the board decided to set the limit instead at 21 cents, plus an additional sum to account for fraud losses. The final rule is costing banks an estimated $8 billion annually.
The retail industry argued unsuccessfully that the Fed is improperly letting banks recoup the fixed costs of their debit- card programs, including the money spent on network hardware, software and labor. The merchants point to a provision in Dodd- Frank that says banks can’t collect costs “not specific to a particular electronic debit transaction.”
The Obama administration defended the rule, saying the Fed board reasonably concluded that any line between variable and fixed costs would be artificial and unworkable.
The case is NACS v. Board of Governors of the Federal Reserve System, 14-200.
Compliance Policy
Putin Turns Tax Screw on Richest Russians With New Laws
President Vladimir Putin is pushing harder on Russia’s richest citizens to repatriate offshore assets amid a slump in the ruble and the imposition of sanctions by the U.S. and the European Union.
Under new tax rules made law by a presidential decree in November, Russian residents will from this year pay a tax of 13 percent on earnings reported by foreign companies and trusts they control. Should authorities prove those entities are managed from Russia and don’t have significant assets or employees abroad, the tax rate increases to 20 percent.
Russian policy makers are struggling to contain the country’s worst currency crisis since 1998. The new tax comes three years after Putin backed efforts to persuade Russian entrepreneurs and officials to repatriate as much as $1 trillion held in offshore centers from Cyprus to Switzerland.
Russia has experienced an outflow of assets over the previous 20 years. The Russian central bank deployed emergency steps including interest-rate increases and spent $88 billion in interventions to prop up the ruble.
Interviews/Commentary
Fed Working to Find Libor Alternatives, Powell Says
Federal Reserve Governor Jerome Powell and U.K. Financial Conduct Authority Chief Executive Officer Martin Wheatley talked about efforts to improve financial market structure and currency benchmarks.
“It has to be a global effort,” Wheatley said, referring to preventing manipulation of currencies and other asset classes.
They spoke at the Brookings Institution in Washington. Brookings’s Douglas Elliott also spoke.
For the video, click here.
–With assistance from Greg Stohr in Washington and Anna Baraulina, Alex Sazonov and Yuliya Fedorinova in Moscow.
To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net. To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net. David Glovin, Charles Carter
