Banks explore acquiring network to bypass debit-card fee caps

Several large banks have held tentative talks about acquiring a network owned by a fintech company, according to the Wall Street Journal. The discussions involve JPMorgan, Bank of America, Wells Fargo and PNC Financial Services Group. Under the 2010 Dodd-Frank law, known as the Durbin amendment, banks with more than $10 billion in assets face caps on debit-card interchange fees when transactions are routed through external networks.

Banks that own their own networks are exempt from those caps.

Background on fee rules The Durbin amendment was signed into law by former President Barack Obama and gave the Federal Reserve authority to set limits on interchange fees. Last year, U.S. banks collected nearly $66 billion in credit- and debit-card interchange fees, equal to about 11 percent of their noninterest income.

Banks have said the caps limit revenue needed to support free checking accounts and debit-card rewards programs. Merchants have said the limits help keep prices lower for consumers, who pay an average of 34 cents, or 0.73 percent of each transaction, in interchange fees.

Status of the talks Some banks that reviewed the network have already decided against moving forward, while others cited concerns about potential regulatory and merchant backlash, sources told the Journal. There is no guarantee any deal will occur. Wells Fargo, PNC and the fintech company declined to comment.

JPMorgan and Bank of America did not immediately respond to requests for comment. The talks follow Capital One Financial's $50.6 billion acquisition of Discover Financial last year, which gave Capital One ownership of its own network.