* Frank says fee limit too low
* Says it is unlikely to help consumers
(Adds additional quote, background, byline)
By Dave Clarke
WASHINGTON, Dec 17 The Federal Reserve's
proposal to limit debit card fees would not allow card
companies to cover the full cost of transactions, U.S. House
Financial Services Chairman Barney Frank said in an interview
The proposal released on Thursday would generally limit
debit "interchange" fees at 12 cents per transaction. The
average interchange fee for all debit transactions was 44 cents
in 2009, the Fed said.
"I think the way it was written, the amount the credit card
companies are allowed to charge is too low," said Frank. "It
does not reflect the full cost of all that you have to do if
you are running a credit card operation."
Banks charge retailers the fees and merchants have long
tried have a limit put in place.
The fee limit was included in the financial regulatory
overhaul law enacted in July. Frank is one of the law's main
authors and it is often referred to as Dodd-Frank, with Senate
Banking Committee Chairman Christopher Dodd being the other
CardHub.com said on Friday it estimates the Fed proposal
would cost banks $13 billion in revenue annually.
Frank expressed concern that whatever savings are achieved
will not be passed on to the consumer.
"Unfortunately the evidence we've seen elsewhere is that
consumers don't get any benefit," he said.
Analysts expect banks to make up for lost fees by
curtailing rewards programs and increasing other fees.
Frank said the fee limit was added to the bill at the
insistence of the Senate and that he would have preferred it
had been left out.
Frank has also expressed concerns the limit will hurt small
banks even though they are technically exempt from that
provision of the law.
The rule, as required by the law, also seeks to introduce
more competition into the card network market by requiring that
transactions be able to be processed over more than one
network, which analysts view as a blow to Visa (V.N) and
(Reporting by Dave Clarke; Editing by Robert MacMillan and