Visa, MasterCard Climb as Congress Weighs Debit Card Deal

Visa Inc. and MasterCard Inc., the world’s biggest payments networks, climbed more than 5 percent as the U.S. Congress worked toward a compromise that would protect transaction fees they charge to banks.

The House will seek to maintain the Senate’s proposed cap on debit-card interchange, or “swipe” fees, according to Representative Barney Frank, the Massachusetts Democrat leading talks to produce a final regulatory overhaul bill. The plan from Senator Richard Durbin would empower the Federal Reserve to set fees charged to merchants that are “reasonable and proportional” to the cost of processing debit transactions.

“If the counter-proposal becomes law, Visa and MasterCard still may have to cope with some business-model changes, but these would likely be less than had been feared,” Jason Kupferberg, an analyst at UBS AG in New York, said today in a note to clients.

The compromise prevents the Fed from regulating “network fees” that Visa and MasterCard charge to banks on each transaction as long as the fees aren’t used to “circumvent” interchange regulation, according to Durbin, the Illinois Democrat and majority whip. Reloadable prepaid cards, including those used to disburse government benefits, would be exempt.

The House version also would allow the Fed to consider fraud-related costs in setting interchange rates.

“We were able to reach an agreement which makes minor changes to strengthen consumer protections and bring competition to a market where there is none,” Durbin said in a statement. “We’ve addressed the concerns of states regarding their ability to provide services to the unemployed and the concerns of small financial firms regarding their ability to provide services to the unbanked.”