Wells Fargo scraps debit card rewards due to new regulations

Wells Fargo scraps debit card rewards

Wells Fargo responded to new restrictions set by the Federal Reserve by scrapping a debit card rewards program for bank customers.

The ruling by the U.S. central bank is based on the Dodd-Frank Act signed into law by President Barack Obama last year. That piece of legislation installed a ceiling of 12 cents per transaction on charges card companies can levy merchants.

In an e-mail to Bloomberg, Wells Fargo spokesperson Lisa Westermann wrote, "Due to pending regulatory changes that are expected to result in a significant reduction in fees retailers pay issuers for debit-card transactions, Wells Fargo will no longer be enrolling customers in the debit-card rewards programs."

Westermann added that the halt in enrollment will begin March 27 and April 15 for Wachovia Corp. and Wells Fargo customers respectively.

The San Francisco-based diversified financial services company and other banks tried to lobby against the legislation before it was passed by Congress. They are now hoping to postpone the implementation with the help of some legislators.

Wells Fargo said caps on debit card deals "make no sense" and contrary to free market principles.

"What's next? Will the government require car dealers to sell a new vehicle for $5,000 or grocers a gallon of milk for 50 cents?" said the bank's chief executive officer John Stumpf in a letter to shareholders this week.

The bank said if the new measure is delayed, they are willing to revive the debit card rewards program to customers. Other lenders such as JPMorgan Chase & Co. also announced that their rewards program will cease just like the decision made by Wells Fargo.

Posted by James Fried on Sunday March 27 2011, 5:34 AM EDT. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0