Debit-Card Cap Interferes With Benefit Payments, Nebraska Says

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Businessweek reports:



By Peter Eichenbaum



May 27 (Bloomberg) -- A U.S. Senate proposal to limit debit-card “swipe” fees could increase costs to taxpayers and harm citizens who receive benefits on prepaid cards, according to Nebraska Treasurer Shane Osborn.



Lowering the fees paid by merchants may discourage banks from issuing the cards that governments use to disburse money to senior citizens and needy families, Osborn wrote in a letter to lawmakers yesterday. The measure, part of the financial overhaul bill, directs the Federal Reserve to ensure that debit-card swipe fees, or interchange, are “reasonable and proportional” to the cost of processing transactions.



“A regulated debit interchange rate would decrease or eliminate the ability of financial institutions to offer these cost-effective programs to the public sector,” Osborn wrote. “Financial institutions issuing these cards may raise fees on cardholders or states to recoup lost revenue.”



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