U.S. banks and other debit card issuers could not charge retailers more than 12 cents per transaction under a Federal Reserve staff proposal released on Thursday.
News of the proposal sent shares of Visa Inc (NYSE:VISA) and MasterCard Inc (NYSE:MA) down more than 10 percent.
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Banks and transaction processors like Visa and MasterCard collect fees from retailers every time a customer buys something with a debit card. The fees total more than $20 billion annually.
The Fed staff proposal on so-called debit "interchange" fees seeks comment on two alternative fee structures, but both limit the maximum fee to 12 cents per transaction.
It also seeks comment on how to adjust fees based on fraud-prevention costs. Banks and transaction processors want regulators to broadly define those costs, and allow them to recover such costs through the interchange fees.
The proposal tries to prevent issuers from evading the new regulations by prohibiting them from receiving "net compensation from a network for debit card transactions."
The Fed board is expected to vote shortly on the staff proposals, with a comment period that would end Feb. 22.
The crackdown is part of the sweeping Dodd-Frank financial reform bill signed into law in July, and comes amid a broader government tightening of credit and debit card practices.
Visa had no immediate comment. MasterCard did not immediately respond to requests for comment.
(Reporting by Dave Clarke and Maria Aspan in New York; editing by Gerald E. McCormick and John Wallace)