WASHINGTON – Yesterday, NACS sent comments to Jennifer J. Johnson, secretary of the Board of Governors of the Federal Reserve System, about debit card interchange fees and routing. NACS also supports the letter sent by the Merchants Payments Coalition.
NACS highlighted that payment card cost, with interchange as the largest component, “represents the single largest operating expense in our industry behind payroll expense, and is forecast to have cost the industry $8.9 billion in 2010. Of all card payment types, signature debit card products are the single fastest growing tender type within our industry and now comprise more than 50 percent of the industry’s Visa and MasterCard interchange expense.”
The association goes on to talk about what will impact the convenience and fuels industry the most. “With respect to debit interchange transaction fees, NACS unreservedly believes Alternative 1 to be the best combination of reduced regulatory burden, clarity and increased efficiency. While NACS believes the proposed safe harbor is overly generous given the Federal Reserve’s own data and other countries’ debit systems (many of which operate without interchange), this option represents real progress toward an improved system. The safe harbor and cap should apply to every transaction. For example, no issuer should be able to exceed the cap on any transaction even if the issuer keeps average fees below the cap.
“With respect to fraud and fraud mitigation costs, NACS supports comments submitted by the Merchants Payments Coalition advocating for a performance standard for determining qualified fraud prevention expenses. The baseline for such a standard should be the fraud levels experienced on PIN debit transactions, which are far lower than those for signature debit.
“With respect to debit card restrictions, NACS unreservedly recommends the adoption of Alternative B by the Board as the only suitable solution to establishing competition between card networks on every transaction. Alternative A would have limited effect; it would not create competition for the majority of transactions and it would not satisfy the language or intent of the Durbin Amendment. Further, the minimal cost and technical requirements of implementing Alternative B should be recognized and an accelerated implementation deadline should be adopted.”
NACS would like to thank the more than 200 convenience store operators who listened to our calls to action and sent letters to the Fed in support of the Durbin Amendment. To keep the momentum strong, NACS needs you to continue sending letters to your members of Congress.