UPDATE: Retail Leaders Take to the Hill on Interchange Fee Reform
WASHINGTON -- The debate surrounding credit card swipe fee -- to cap or not to cap -- continued today as members of the retail industry pushed Congress for limitations. They reiterated their position at the eighth congressional hearing on the interchange fees.
"Swipe fee reform can reduce the hidden fees that inflate prices, and that is a win for consumers," Doug Kantor, counsel for NACS and the Merchants Payments Coalition, said in today's House Subcommittee on Financial Institutions and Consumer Credit hearing: "Understanding the Federal Reserve's Proposed Rule on Interchange Fees: Implications and Consequences of the Durbin Amendment."
"In fact, consumers are already saving due to the Durbin amendment," Kantor said. "The provision that allows for cash discounts helped embolden merchants -- especially at the gas pump and in restaurants -- to offer cash discounts in spite of the aggressive restraints that the card networks had put on them in the past."
According to a NACS release, Kantor also took the opportunity to dispute claims by the banking industry that the reform would cause other fees to increase. "Banks looked for years to find excuses for raising checking fees on consumers. Today, it just happens to be the Durbin amendment's turn to join the hit parade."
He added that banking leaders have argued in the past that the financial collapse of 2008, the Credit Card Act of 2009 and overdraft regulations would each end perks like free checking. "They are no longer credible on this question," Kantor said. "If the banks were correct that reducing swipe fees would result in higher bank fees on consumers, then the dramatic increase that led to a tripling in swipe fees over the past decade should have reduced consumer fees charged by banks. That has not happened. Banks have increased consumer fees over the last decade as well. Overdraft fees alone, for example, doubled from $19 billion to $38 billion from 2000 to 2009."
Kantor also explained the proposed rules will allow banks to still make a sizable profit on debit transactions. The proposed rulemaking by the Federal Reserve did not see to end debit swipe fees but set a per-transaction rate of seven or 12 cents.
"The Fed's survey of banks found that [debit swipe fee] costs amounted to four cents per transaction, but the Fed's rule allows for either seven or 12 cents to be charged. That makes for average profit margins of 75 percent to 300 percent. Those are margins that no retailer would dare dream of making," he added.
Kantor's testimony before the subcommittee echoed what he and other leaders in the retail industry said yesterday in a conference call organized by the Merchants Payments Coalition. During the call, Kantor; Todd McCracken, president and chief executive officer for the National Small Business Association; and Dennis Lane, a 7-Eleven franchisee in Quincy, Mass. joined Rep. Peter Welch (D-VT) in detailing the ever-increasing toll interchange fees are taking on retailers and small business owners, as CSNews Online reported.
"Last year's proposed rulemaking by the Federal Reserve sought to create a system in which debit swipe fees are reasonable and proportional to the processing costs incurred," NACS president and chief executive officer Hank Armour said in a NACS statement. "We cannot allow Visa, MasterCard and the world's biggest banks to spend millions of lobbying dollars to delay implementation and protect their multibillion-dollar cash cow that delivers no commensurate benefits to retailers or consumers."