WASHINGTON–(BUSINESS WIRE)–The National Retail Federation welcomed today’s signing of financial reform legislation that includes landmark provisions to control the $48 billion in credit and debit card swipe fees paid by retailers and their customers each year, and urged regulators to follow Congress’ intent of achieving major reductions in the fees.
“Big banks lobbied hard to keep this legislation from becoming law and we fully expect them to put pressure on the Federal Reserve as it drafts the regulations intended to result in the ‘reasonable’ debit card fees sought by Congress.”
“This is a dramatic first step in the fight to control rising credit and debit card fees and has tremendous potential for savings, but we know the fight isn’t over,” NRF President and CEO Matt Shay said. “Big banks lobbied hard to keep this legislation from becoming law and we fully expect them to put pressure on the Federal Reserve as it drafts the regulations intended to result in the ‘reasonable’ debit card fees sought by Congress.”
“Congress realizes that debit cards are simply plastic checks, and has said the Federal Reserve should look at them with paper checks in mind,” Shay said. “The result shouldn’t be swipe fees being cut by a quarter or even a half. The result should be plastic checks that get paid at essentially face value.”
President Obama today signed H.R. 4173, the Dodd-Frank Wall Street Reform Act of 2010, named for Senate Banking Committee Chairman Christopher Dodd, D-Conn., and House Financial Services Committee Chairman Barney Frank, D-Mass.
The bill includes an amendment sponsored by Senate Majority Whip Richard Durbin, D-Ill., that would require the Federal Reserve to set regulations resulting in “reasonable and proportional” swipe fees for debit cards. The Fed would be required to consider banks’ actual costs for processing the transactions and the fact that paper checks drawn on the same accounts are paid at face value. The amendment would also bar the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit cards, and would allow merchants to set minimum purchase amounts of up to $10 for credit cards.
Swipe fees – officially known as interchange fees – are a percentage of the transaction charged by card company banks each time a card is swiped to pay for a purchase. The fees average between 1 and 2 percent for debit cards and 2 percent or more for credit cards. Overall swipe fees charged to retailers and other business by Visa and MasterCard banks totaled $48 billion in 2008, with debit swipe fees accounting for $20 billion of the total.
Current card and banking industry prices effectively require retailers to include the fees in the price of merchandise, resulting in the average household paying $427 more annually than they would pay without the fees, according to NRF estimates.
As the world’s largest retail trade association and the voice of retail worldwide, NRF’s global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. www.nrf.com