Provisions in the financial services reform bill passed by the Senate Thursday requiring reasonable debit card swipe fees and making it easier for merchants to give discounts to customers who don't use credit cards represent a major victory for retailers and consumers in their fight against card fees, the National Retail Federation said.
“This is a landmark step forward in protecting Main Street against the excesses of the banking industry,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Five years ago most consumers didn't know these fees existed or that the banks were quietly taking billions of dollars out of their pockets. But today we have a bill on its way to the President's desk that tells the big banks enough is enough. The days of big bank bailouts are coming to an end – Congress has clearly sided with Main Street businesses and their customers.”
“This is an all-around win for consumers,” Duncan said. “By requiring debit fees that are reasonable and proportional to actual costs, retailers will see their costs reduced and will be able to pass on the savings through lower prices and greater value for their customers. Eliminating obstacles to giving a discount or other benefit for cash, check or debit cards will make it easier for retailers to reward customers who are clued into these fees and choose not to use credit cards.”
“Swipe fees are a prime example of banks charging fees that are incredibly out of proportion with the costs involved, a story that's familiar to anyone who's ever been charged a $35 overdraft fee for a buying a cup of coffee or an inactivity fee for the credit card crime of not having used their card enough,” Duncan said. “Banks began saving huge sums over the cost of processing paper checks when they introduced debit cards as 'check cards' a generation ago. When debit cards first came out, transactions were redeemed at full value. But saving millions wasn't enough. The banks couldn't resist the urge to invent yet another fee.”
The Senate voted 60-39 today to approve the conference report on 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 report is the final version of a pair of wide-ranging financial services reform bills first passed by the House in November and the Senate in May. The report was approved by the House on June 30 and now heads to President Obama.
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.
