Visa, MasterCard Plunge 9% on Charge Limits

123jump.com Staff
14 May, 2010
New York City

Visa Inc and MasterCard Inc dropped as much as 10% after Senate approved a late hour amendment to the bill that empowers the Federal Reserve Bank to limit interbank charge.

[R]2:20 PM New York – Visa Inc and MasterCard Inc dropped as much as 10% after Senate approved a late hour amendment to the bill that empowers the Federal Reserve Bank to limit interbank charge.[/R]

U.S. Senate passed the bill that empowers the Federal Reserve to limit interchange fees or “swipe fees” charged to merchants. The move surprised the both payment processing companies Visa and MasterCard.

The late hour amendment to financial reform bill pushed by Senate Majority Whip Richard Durbin pushed the limit to fees charged by banks and by payment processors.

The charge limit is likely to hurt revenues at two largest card issuers including Bank of America and JP Morgan Chase but is less likely to have impact on the revenues of payment processors.

However, investors sold stocks of Visa and MasterCard in a heavy trading volume.

Visa Inc ((V)) dropped $9.12 or 10.6% and MasterCard plunged 8.3% or $19.30 to $213.01 in the afternoon trading.

The Durbin amendment allows banks to limits for the purchases and also offer discounts for cash, debit cards, check and specific brand of card.

The Senate approved charge still needs approval from the House and signed into law by President Barack Obama.

Durbin said in a statement the measure will “restore common sense and fairness to this broken system” and allow “merchants to offer discounts.”

Visa Inc issued a statement and noted that when members of Congress debate the bill they will “conclude the amendment harms consumers, credit unions and community banks and should be eliminated from the bill.”