Senate passes interchange restriction bill

In a surprise move, the U.S. Senate last night passed theElectronic Check Parity Act of 2010, which would give the Federal Reserve Board oversight authority on the fees imposed on debit transactions.

The bill "finds that electronic debit transactions serve as a functional replacement for check transactions," thereby giving regulatory authority over such transactions to the Reserve Board.

The bill also lays down new rules for credit card networks, specifically how they incentivize customers to choose one payment method over another:

In General - A credit card network may not, directly or through any agent, processor, or licensed member of the network, by contract or otherwise, inhibit the ability of any person--

(1) to set a minimum or maximum dollar value for such person's acceptance of any form of payment; or

(2) to offer a discount, benefit, or anything else of value to customers in order to create an incentive for customers to pay such person using a form of payment that carries lower transaction fees or costs for such person.

According to Payments Source, the bill faced some last-minute wrangling to make it more appealing to credit unions and community bankers: Such organizations with less than $1 billion in assets are exempt.

The Electronic Check Parity Act is separate from therecent legislation proposed by Senator Tom Harkin(D-IA), which could have an even greater impact on the ATM industry. That amendment to the financial reform bill would place an upper limit of $0.50 on ATM transaction fees.

Watch this site for coverage of the Harkin proposal in the coming days.