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Senate Votes to Include Swipe Fee Reform in Financial Regulatory Bill

WASHINGTON -- Retailers of all types hailed the U.S. Senator for voting to include an amendment to address swipe fee reform as part of the overall financial regulatory bill under consideration.
Convenience stores, in particular, will benefit from the amendment, introduced by Sen. Richard Durbin (D-Illinois) because it would direct the Federal Reserve to issue rules to ensure that debit swipe fees are reasonable and proportional to the processing costs incurred. Visa and MasterCard currently charge debit swipe fees of around 1 percent to 2 percent of the transaction amount -- among the highest rates in the industrialized world. A number of independent research reports have confirmed retailers' argument that swipe fees are considerably more than the actual cost of processing transactions and provide no commensurate benefits to retailers or consumers, according to NACS.

The Durbin amendment also prevents card networks like Visa and MasterCard from penalizing sellers for offering discounts to customers for using competing card networks or other payment methods like cash. The amendment would allow retailer to choose to decline credit cards for small dollar purchases because swipe fees often exceed profits on such sales.

"This historic vote would not have been possible without the tremendous support of our members who called on their senators and asked them to support this common-sense, consumer-friendly amendment," said NACS CEO and President Hank Armour. "These calls, along with the millions of consumer signatures retailers collected and delivered to Congress urging credit and debit card fee reform, clearly shows that members of Congress are listening to their constituents."

In 2008 alone, Americans paid more than $48 billion in swipe fees. These fees are non-negotiable and set in secret by the credit card companies and their member banks, and increase the cost of goods and services purchased by consumers, say retailer trade associations.
The amendment passed the Senate yesterday by a 64-33 vote, despite intense lobbying pressure from financial institutions, which claimed the measure would hurt small community banks. However, the amendment gained support when Durbin increased the exemption for small banks from those with assets of less than $1 billion to exemption those with assets of $10 billion or less. As a result, 99 percent of banks and credit unions and 97 percent of thrifts are included in the exemption. However, more than 80 percent of all interchange fees are collected by the 10 largest banks, which are not exempted. Thus, most retail groups are fine with the small bank exemption since it helped satisfy senators who are concerned about the impact on community banks and small credit unions.

NACS Vice Chairman Dave Carpenter, who operates both convenience stores and a community bank, said in April 28 testimony before the U.S. House Judiciary Committee that swipe fees "are of little value to my community bank."

Other retail groups also hailed the passage of the amendment.

From the Food Marketing Institute: "Today the Senate took a major stride toward restoring fairness and reason to the debit card interchange fee system by approving Senator Durbin's amendment," said Leslie Sarasin, president/CEO of the FMI. "Requiring that the fees be based on the actual cost of debit card payments will generate significant savings, benefiting retailers and, ultimately, consumers. Customers will benefit as the amendment allows retailers greater flexibility in offering them discounts for lower-cost forms of payment."

From National Retail Federation: "Main Street America bailed out the biggest banks in this country not so long ago," said NRF senior vice president and general counsel Mallory Duncan. "Passage of the Durbin amendment ensures that those same banks won't repay our generosity by undermining the fairness and integrity of the checking and debit card system."

From Retail Industry Leaders Association: "This is a great victory for consumers and retailers, small and large. With this vote today, the U.S Senate has stood up to defend consumers and retailers, small and large, protecting them from the excessive fees and anticompetitive practices imposed by big banks and credit card companies," said RILA senior vice president for government affairs, John Emling.

From National Grocers Association: "Senator Durbin is to be commended for his determination and leadership in support of efforts by merchants to level the playing field against the unfair and anti-competitive interchange fees and restrictive practices that have been set by the credit card networks and their largest banks. This is a significant win for consumers and merchants who will benefit from these reforms," said Tom Wenning, NGA executive vice president and general counsel.

The amendment, if passed with the overall financial regulatory reform bill, will help large and small retailers alike. Dennis Lane, a single-store 7-Eleven franchise owner and national spokesman for the group, Reform Swipe Fees NOW, said, "The vote to include Senator Durbin's amendment is a tremendous victory for consumers and for every Main Street merchant in America. Last year the credit card companies made more off of my store than I did -- I know that I am not alone here, and that just isn't right. Commonsense swipe fee reform will allow consumers and small business owners like me to keep more of our own hard-earned money -- it is important that our representatives see this thing through now."

The Senate must still pass the broad financial services regulatory reform legislation, a vote that could come next week. If the Senate approves the bill, it must be reconciled with the reform legislation previously passed by the House. Because the House legislation did not include any reform of swipe fees, the Senate and House will have to reach agreement on this issue. Once the two chambers have combined the two bills, both the House and Senate will again vote on the final package before sending it to the president for his signature.

"This fight is not over," said NACS' Armour. "We must keep the pressure on to continue to fight for swipe fee reform and get this legislation passed into law. NACS will continue to develop communications platforms that allow members to tell their elected leaders that it is time to eliminate the big banks' stranglehold on our businesses and give it to the rightful owners: the small businesses that serve Americans every day."
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