From: The Washington Post/On Small Business
By J.D. Harrison
Community banks and credit unions are reporting lower debit-card processing revenue as a result of financial reform laws, sparking concerns that they may be forced to impose new fees on customers to offset their losses.
Their experience stood in contrast to new reports published by the Federal Trade Commission and the Government Accountability Office, which suggest that a provision meant to protect small banks from debit-card reform has indeed shielded them from any significant losses in revenue. The provision exempted small financial institutions from reducing their card processing fees (or “swipe fees”) but capped them for large banks. Regulators said the change prompted credit-card companies to create a two-tiered pricing system in which small banks can continue charging customers higher rates each time they use their debit cards.
But community bank and credit union executives say the government reports are premature and don’t necessarily reflect the impact on their businesses.
“The fees that the credit card processors pass on as revenue to banks like ours have definitely gotten smaller,” Denise Stokes, senior vice president of Sandy Spring Bank in Olney, said in an interview. “Those companies took a hit when revenue dropped for the large banks, so they passed some of that loss on to us in the form of lower rates on processing fees. Our loss hasn’t been huge, not as high as what the large banks have been hit with, but still, it’s been significant.”
Local banking executives said they expect the decline to continue in the coming years, which could prompt community banks and credit unions to follow in the path of many of their larger counterparts, adopting new fees and pulling back on free services to make up for lost revenue.