Credit-card transaction fees are higher—2.5% to 3% per transaction, on average—with rewards cards typically carrying higher charges than other cards.
The truth is retailers will continue to accept all debit cards from all banks. Visa and MasterCard each have the “Honor All Cards Rule.” The rules say if a retailer accepts any Visa debit card, the retailer must accept all debit cards under the Visa name. The same with MasterCard. If the retailer refuses, the card companies can fine the retailer or yank out the retailer’s card privilege. In addition, there is no automated way for a retailer to know at the cash register what fee is charged by a specific card, and it isn’t practical to keep a list of cards or to train thousands of sales associates on which card to accept. Finally, retailers simply aren’t going to turn away a customer with a shopping cart full of merchandise and risk having him or her walk out empty-handed.
“Retailers want to begin passing on swipe fee savings to their customers as soon as possible, and today’s announcement means those plans will be able to move forward as planned despite the anti-consumer efforts of some in Congress,” NRF Senior Vice President and General Counsel Mallory Duncan said. “The Fed has received thousands of comments on this proposal and it is appropriate for that input to be carefully and thoroughly reviewed. If they take a few extra weeks, we understand.”
The Fed has proposed capping debit interchange fees at 12 cents per transaction for banks with more than $10 billion in assets. The plan has riled the banking industry—including the community banks and credit unions exempt from the cap—which has continued to push  for the rule to be delayed.
Retailers have their own group, the Merchants Payments Coalition, that’s fighting hard against efforts to delay the cap. It argues that consumers pay more for goods and services to compensate for excessive swipe fees.
Mallory Duncan (Senior Vice President, General Counsel, National Retail Federation): “We think pretty lowly of it. This is an area that has been studied to death. Merchants have been paying these fees for too long…. At some point, enough is enough. “
Senator Richard Durbin, the Democratic author of the fee limit, has argued a delay is simply a tactic to buy time for a repeal.
While large banks are primarily targeted by the rules, they have kept a fairly low profile on the public debate, leaving the credit card companies and smaller banks to do the day-to-day lobbying, despite the small-bank exemption.
That was supposed to change on Tuesday with a planned appearance by Pamela Joseph, who runs US Bancorp’s payments unit. She would have been one of the first executives from a top U.S. bank to debate the debit card fee caps in Washington.
Top executives from card networks, major banks, credit unions, small financial institutions, law firms, consumer advocate groups and more gathered March 29 in Washington, D.C. at this PYMNTS.com-sponsored event. The conference explored the impact of the 12-cent interchange cap and related regulations the Federal Reserve proposed for debit cards last December in response to Durbin Amendment of the Dodd-Frank financial reform bill.
You can help by writing a letter to your Members of Congress urging them to make sure that swipe fee reforms are here to stay. The big banks are trying to overturn reforms so that they can keep collecting huge profits off of Main Street merchants and consumers. We’ve come to far to let the big banks get their way. Check out one Long Island business owner’s powerful letter here.
The more that customers have used them over the past 15 years, the more banks have been able to remove minimum balance requirements and transaction fees they used to charge to fund all the cash and checking transactions. These forms of payment cost 70 cents or more a pop, according to JPMorgan — at least 60 percent more than the average debit card fee
Bernanke said it would be important for the banks to adapt to the changing regulatory environment, in remarks prepared for the annual convention in San Diego of small- and medium-sized banks. Bernanke acknowledged their concerns about the new law. But he said most of the requirements are aimed the country’s biggest banks and not them.
National Retail Federation General Counsel Mallory Duncan replies that consumers have displayed a preference toward the speed and convenience of debit cards, as well as growing aversion to debt, that won’t soon be altered.
Just when we thought Congress had finally restored some fairness to runaway credit card processing fees, some lawmakers are trying to reverse course, suspending a portion of the Wall Street Reform and Consumer Protection Act, which requires the Fed to ensure that debit fees are reasonable and proportionate to issuer costs.
The 12-cent rate puts us in the same boat as that businessman trying to make up his losses on volume. We estimate that up to two out of every three credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenue by 40 percent.
Bernanke said the Fed hopes to finalize the rules by July 21, when that provision of the law goes into effect.
Every Retailer and American family should write Congress and urge supporting the Durbin #SwipeFees AmendmentMarch 29, 2011
If you are in favor of the interchange limitations in the Durbin Amendment, you’ll want to visit Unfair Credit Card Fees (a website created by the Merchant Payments Coalition), and use their letter to Congress which states:
I am writing to you today to urge you to vote NO on any type of delay of the debit card swipe fee reform.
Congress should make it easier, not harder, to offer consumer discounts; delaying swipe fee reform will make discounting nearly impossible. And discounting is all the more important as gasoline tops $4 a gallon.
The same big banks that were bailed out a few years back are asking Congress to turn its back on American business owners and consumers, so that the credit card companies and their banking allies can keep on gouging Main Street Americans with their price-fixing swipe fee scheme.
Swipe fee reform was designed to bring fairness and transparency to the shrouded swipe fee payments system. The law says that the big banks have a choice: they can open the fees to competition and charge whatever price the market permits or they can continue to fix their fees, but those price-fixed fees must be “reasonable and proportional” to their costs.
Congress has held 9 hearings and 1 markup on swipe fees and the GAO has issued 3 reports. I can read the writing between the lines. I know that S. 575 and H.R. 1081 were not written to study the swipe fees that are crippling my business and every consumer in your district; they were written using the big banks’ scare tactics in order to completely derail these reforms. These aren’t “study” bills…they are “kill” bills.
Americans pay the highest swipe fees in the world. Merchants and consumers have been waiting for years to see these reforms realized, and every month of delay means another $1 billion that we have to hand over to the big banks and credit card companies.
A spokeswoman for MasterCard referred this afternoon to a recent statement by the company that deploys wording similar to Durbin’s, albeit on the opposite side of the issue. “We are confident that a study will show that directing the government to fix prices rather than letting the free market system work will result in higher prices for consumers,” the statement reads. Likewise, the Electronic Payments Coalition, an industry group pressing for the delay, asks — then answers — this question on its Web site:
Banks, of course, cannot argue with a straight face that a bill that reduces their allowed transaction profit from 1,100 percent to 300 percent, as Durbin’s legislation does, would send them to the poorhouse. They’re arguing instead that allowing more competition in the swipe-fee industry somehow would damage smaller banks.
U.S. District Judge William Pauley in Manhattan Tuesday concluded that a jury could find that conduct by the credit card and travel services company “caused injury to competition in the credit card market.”
Riding a wave of public outrage over credit card practices, 7-Eleven Inc. wants to show merchants are victims of the industry too
March 28 (Bloomberg) — U.S. Senator Richard Durbin of Illinois, the chamber’s No. 2 Democrat, talks about a proposed Federal Reserve rule that would cap debit-card “swipe” fees. Durbin, speaking with Betty Liu on Bloomberg Television’s “In the Loop,” (Source: Bloomberg)
Chris Wragge talks to CBS News business and economics correspondent Rebecca Jarvis about how banks are raising their rates and taking away rewards programs from customers.
NDP Leader Jack Layton said Tuesday he would cap credit card rates and fees as a way to control the household debt of Canadian families.
The lawsuit names Visa Inc.’s (V) Visa Canada Corp., MasterCard International Inc. (MA#, Bank of Montreal #BMO#, Bank of Nova Scotia #BNS#, Canadian Imperial Bank of Commerce #CM#, Desjardins Financial Group Inc., National Bank of Canada #NA.T#, Royal Bank of Canada #RY#, Toronto-Dominion Bank #TD#, Bank of America Corp.’s #BAC) MBNA Bank Canada, Capital One Financial Corp. (COF) and Citigroup Inc. (C).
Consumer groups have decried the delay, saying it would postpone much-needed reform to a system that is “uncompetitive, non-transparent and harmful to consumers’ [PDF]. At the same time, these groups voiced concerns that if interchange reform passes, banks will levy other charges on consumers — something many banks have warned they may do.
The claim alleges that Visa and MasterCard rules force merchants to accept every Visa or MasterCard credit card, even if those cards carry high fees for merchants. It also alleges that the rules prevent merchants from charging more for payments with premium cards.
PYMNTS.com Presents: The Fed’s Proposed Debit Card Regulations: Are They Reasonable and Who Will Win #SwipeFeesMarch 29, 2011
Two law firms say they have filed a class-action lawsuit against Visa and MsterCard and some of the country’s biggest banks, alleging they worked together to fix prices charged to merchants.
The suit, filed by Branch MacMaster LLP and Camp Fiorante Matthews, claims that the credit card companies and banks force retailers to accept all of their credit cards — even if the cards charge them higher processing fees.
“The big banks and credit card companies have been saved from their own internal failures and shortcomings time and time again by this government,” he said. “Now, here they go again looking for a break on interchange fees worth $1.3 billion a month to them.”
Durbin, the Senate’s No. 2 Democrat, exempted smaller banks and credit unions — institutions with less than $10 billion in assets. Nonetheless, community banks are working against the fee change.
The odds are stacked against Tester (D., Mont.) and other lawmakers who are pushing for a delay in the federal regulations on so-called interchange fees. That’s because proponents of delaying the rules would likely need to secure 60 votes even though just last summer, 64 senators voted for regulating the fees.
Maryland 7-Eleven Franchisees Travel to Washington, DC To Support #SwipeFees Reform (via Press Release)March 28, 2011
With swipe fee reform on the chopping block before it has even taken effect, franchisees fly to nation’s capital to ask Congress to stand strong with America’s small business and consumers
WASHINGTON—This week, 7-Eleven franchisees from across Maryland and Virginia plan to meet with their members of Congress and staff to again discuss the urgent need to implement the swipe fee reforms that were passed by Congress passed and signed into law by the president last year.
“I’m fed up,”said Dennis Lane, 7-Eleven franchisee and national spokesman for Reform Swipe Fees NOW! “On behalf of more than 5,000 7-Eleven franchisees, thousands of employees and millions of customers who supported our historic campaign to stop unfair fees, we are going back to Washington to hold politicians accountable for the promises they made, and ask for the protection of much needed swipe fee reform that would benefit real Americans.”
Last year, President Barack Obama signed the Wall Street Reform and Consumer Protection Act, a piece of legislation that included an amendment to reform debit card swipe fees that gathered broad bipartisan support, marking a tremendous victory for convenience store owners and other small owners across the country. In 2009 and 2010, 7-Eleven submitted over 1.6 million petitions signed by franchisees, employees and customers, and conducted dozens of meetings with members of Congress and staff.
In light of proposed legislation to repeal or delay swipe fee reform, 7-Eleven franchisees’ businesses are under threat once again . With their future livelihoods under attack, 7-Eleven franchisees are once again taking time away from their business to go to Washington and hold their representatives accountable for swipe fee reform that was passed last year.
“As a 7-Eleven franchisee in a small town, my employees and I are very involved in the community, in the neighborhood, and in the schools. It’s very rewarding,” said Imtiaz Ahmad, 8-year 7-Eleven Franchisee in Clinton, MD. “But if credit and debit card fees continue increasing, costs will go up for my customers, profits will decrease, and I might not have enough money to pay as many employees. I am going to tell my Congressman that we can no longer afford these high fees.”
Over the next three months, dozens of 7-Eleven franchisees from across the nation will fly to Washington, D.C. to meet with their members of Congress and ask them to keep their promises, stand strong with America’s small businesses and consumers, and to oppose any effort to delay or repeal the swipe fee reform that Main Street fought so hard for.
|WHO:||Dennis Lane, 7-Eleven Franchisee and national spokesman for Reform Swipe Fees NOW!
Imtiaz Ahmad, 7-Eleven Franchisee, Clinton, MD
|WHEN:||Tuesday, March 29 – Wednesday, March 30|
About FZs For Fairness: FZs for Fairness is a project of 7-Eleven. The project unites more than 5,000 7-Eleven franchisees across the United States that are fighting for fair debit and credit card swipe fees, once and for all.
MasterCard is today releasing a five-year plan to broaden the use of its tap cards, which don’t require shoppers to enter a personal code or provide a signature during transactions. Some 35,000 shops in Australia accept PayPass, Masters said.
Following are excerpts from the unofficial transcript of Senator Richard Durbin on CNBC’s “Squawk Box” today. Following is a link to the full interview on CNBC.com: http://www.cnbc.com/id/15840232?video=3000012928&play=1.
THERE IS ABSOLUTELY NO CHOICE FOR A MERCHANT ACROSS AMERICA BUT TO ACCEPT VISA AND MASTERCARD IF THEY ARE GOING TO BE IN BUSINESS WHETHER IT IS A CONVENIENCE STORE OR A BIG BOX AND THE FACT IS THIS .44 CENTS WAS IMPOSED BY THE CREDIT CARD COMPANIES THROUGH THE BANKS ON THESE MERCHANTS SO WHEN YOU SAY YOU ARE AGAINST PRICE FIXING HOW DO YOU DEFEND THAT?.”
The planned payment system would allow Google to offer retailers more data about their customers and help them target ads and discount offers to mobile-device users near their stores, these people said. Google isn’t expected to get a cut of the transaction fees.
Banks, of course, cannot argue with a straight face that a bill that reduces their allowed transaction profit from 1,100 percent to 300 percent, as Durbin’s legislation does, would send them to the poor house. They’re arguing instead that allowing more competition in the swipe-fee industry somehow would damage smaller banks.
Credit-card transaction fees are higher—2.5% to 3% per transaction, on average—with rewards cards typically carrying higher charges than other cards.
It was interesting to read all of the biggest banks’ talking points against swipe-fee reform in the March 20 guest opinion by Tom Boos of the Billings Federal Credit Union. Unfortunately, the op-ed didn’t describe the problem or the proposed solution. Instead, it was full of the campaign scare tactics and misinformation upon which opponents of swipe fee reform have relied to make their case.
At the middle of the issue sits the electronic payments system for credit and debit cards that must be paid for by somebody. The system belongs to the financial industry, financed up until now by swipe fees that average about 44 cents per transaction.
JPMorgan Chase (JPM, Fortune 500) notified existing customers last week that their debit rewards programs will disappear July 19. The bank eliminated debit rewards for new customers in February.
In a move attributed to the pending regulatory changes threatening bottom lines of U.S. banks, Wells Fargo says it will no longer be enrolling its customers in debit rewards programs.
In an attempt to prevent another financial crisis, Congress passed the Dodd-Frank Bill last year. It has a slew of new regulations, many of which the big banks neutered fairly quickly with their lobbyists. What they didn’t see coming was an amendment by Dick Durbin (Dem., Ill.) that caps fees banks can charge retailers for debit- or credit-card transactions.
I mean this is just corrupt. The claims that this would hurt low and middle-income Americans is an invented claim from the banks. If you want to get real about this, it represents the banks holding their customers hostage, and these interest groups want to pay the ransom.
U.S. Sen. Dick Durbin was in Quincy Thursday morning to offer support for a cap on swipe fees paid by businesses for credit and debit card sales.
via Quincy Herald Whig.
Durbin: Interchange delay bill will need 60 votes – The Hill’s On The Money #SwipeFees #FightSwipeFeesMarch 25, 2011
“Those who say, ‘Well, we need to study this more’ — let me tell you what, that is a smokescreen as far as I’m concerned,” he said. “We don’t need a study, we need action.”
In Tennessee, small businesses chide those who would seek to undo Durbin Amendment – Retail Industry Leaders AssociationRetail Industry Leaders AssociationMarch 24, 2011
The fact is, economic and regulatory experts agree the Fed rule is good public policy, despite bank pleas to maintain their broken marketplace so they can keep their profits disproportionately high (and unearned) at the hands of corner stores across Middle America.
The Durbin Amendment’s an opportunity to end an unfair trade practice. It ends one of the many unscrupulous banking practices that continue to torment the average American. It ends the “invisible sales tax.” And it’s… a stimulus. Think of it as a way to return $14 billion every year to the real economy. And it doesn’t come from taxes, but from the bloated financial sector — a sector that’s already back to the historically high share of national profits that it had before the Great Recession.