Retailers tell Congress not to delay swipe fee reforms
18 February 2011 | 3709 views | 1
Source: National Retail Federation
The National Retail Federation today urged Congress not to delay debit card swipe fee reform scheduled to take effect this summer, saying the card industry's push for postponement could cost retailers and their customers more than $1 billion per month.
"Congress recognized last year that the credit card companies and big banks have been extracting monopoly-like fees from merchants and their customers for far too long," NRF Senior Vice President and General Counsel Mallory Duncan said. "Now that reform is about to go into effect, the card industry is asking for a do-over they don't deserve. Every month they can push back reform is another billion dollars taken out of consumers' pockets. We would rather use that savings to cut prices, provide more retail workers with health insurance or put more Americans to work."
The House Financial Services Committee's Subcommittee on Financial Institutions is scheduled to hold a hearing today on debit card swipe fee regulations proposed by the Federal Reserve in December. While the hearing is being billed only as an examination of the proposal, the card industry is reportedly seeking legislation that would delay implementation of the regulations by anywhere from six months to two years.
Under swipe fee reform included in last year's Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fed was instructed to establish regulations that would result in "reasonable" debit card fees proportional to banks' cost of processing debit transactions. The Fed proposed in December that debit swipe fees, currently 1 to 2 percent of each transaction, be capped at a flat fee of no more than 12 cents per transaction. Financial institutions with less than $10 billion in assets would be exempt.
Debit card swipe fees currently total about $20 billion a year, which card company practices compel merchants to pass along to customers in terms of higher prices. The Fed estimates that its proposed cap would lower fees about 70 percent, or about $1.2 billion a month. At that rate, a two-year delay would cost merchants and consumers nearly $30 billion.
NRF has told the Fed its proposal does not go far enough because banks have claimed only 4 cents as their cost of processing transactions and authorities in other countries have said even lower fees would more accurately reflect actual costs. NRF is arguing that debit transactions should be paid at close to face value since paper checks drawn on the same bank accounts are paid at face value and debit cards are merely plastic checks. The Fed is currently receiving comments on its proposal and is required to issue a final version in April, with the rules taking effect in July.