Debit card transaction fees will be cut by more than half in October. The fees, deducted from the transaction amounts that banks pay to merchants for debit card purchases, will be limited to a maximum of 21 cents under the new rules announced by the Fed yesterday. Fees won’t decline much for the largest retailers, which have already negotiated favorable deals for themselves, but smaller retailers currently have to pay whatever the banks charge, and they don’t know the size of the fee in advance. Separately, a federal appeals court upheld the constitutionality of the provision, saying that Congress has the authority to regulate banking transaction fees.
Taylor Bean & Whitaker CEO Lee Farkas was sentenced to 30 years in prison for orchestrating the $3 billion fraud that brought down his own company and Colonial Bank last year. The fraud began when Taylor Bean & Whitaker ran out of money in 2002 because of bad mortgage loans, but it was not discovered until Farkas helped to arrange a fraudulent TARP application for Colonial Bank.
Several settlements were announced this week over mortgage-backed securities that weren’t properly described when banks sold them to investors. Hundreds of these cases will be settled over the next three to five years, eventually costing banks in the United States and Europe more than $200 billion in total.
Last weekend there were actions on three credit unions. Borinquen Federal Credit Union of Philadelphia and O.U.R. Federal Credit Union of Eugene, Oregon, were placed into conservatorship. The two credit unions combined have 11,000 members. St. James A.M.E. Federal Credit Union of Newark, New Jersey, was liquidated and its member accounts transferred to North Jersey Federal Credit Union. It had 1,000 members.