BofA exec says proposed merchant debit fees too low-UPDATE 1

Trade the News

Saturday January 08, 2011 05:35:00 AM GMT

* Price says proposed debit rules don't cover bank costs

* Debit interchange fees key part of Dodd-Frank Act

CHARLOTTE, N.C./NEW YORK, Jan 5 (Reuters) - The Federal Reserve's proposed caps on fees that banks charge merchants for processing debit card transactions are too low and do not allow banks' to adequately their cover processing expenses, Bank of America Corp's <BAC.N> consumer bank chief Joe Price said on Wednesday.

Price, in his first public comments on the proposed limits, said lower debit card fees for merchants would prompt the bank to rethink how it charges consumers for its banking services.

The rules were a key provision in the Dodd-Frank Act, the financial reform law passed by Congress in July 2010.

"[The proposed rules] don't really provide payment for providing the service," he said. "There's no question it would affect how we think about our deposit pricing."

Price said the proposed price level does not cover the banks' infrastructure costs, or associated costs like combating fraud. (Reporting by Joe Rauch; editing by Carol Bishopric)

(c) Copyright Thomson Reuters 2011. Click For Restrictions. http://about.reuters.com/fulllegal.asp