The Merchants Payments Coalition Inc., an association of convenience stores, supermarkets, retailers, fuel stations, and an assortment of other business owners, large and small, who accept card payments, continues to be an active proponent of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The amendment was passed to regulate debit card interchange fees.
According to the 2010 Federal Reserve Payments Study, debit card transaction volume in the United States surpassed all other forms of noncash payments in 2009, representing an estimated 35 percent of total noncash payments. In the Federal Reserve's Regulation II; Docket No. R-1404, the card networks reported debit and prepaid interchange fees totaling $16.2 billion in 2009, with the average interchange fee of 44 cents per transaction, at 1.14 percent per the average $38.58 transaction.
"This has been an issue for our membership for well over a decade," said Liz Garner, Director of Government Relations, Food Marketing Institute, an MPC member.
"Our relationship with the card companies is unlike any other business relationship we have. We can't negotiate rates; we can't negotiate terms of card acceptance. And that's why this is one of the fastest growing line items for all of our member companies - everyone from large, national retailers to small, independent operators like ours."
Rachel Wolfe, a spokeswoman for the MPC, which represents an estimated 2.7 million stores and 50 million employees in the United States, said that in the price-competitive retail industry, every penny matters.
"Unfortunately we've been seeing more than a penny increase in swipe fees and these fees are completely anticompetitive," she said. "We've seen those fees triple in the past 10 years, even though the cost of actually processing those transactions has gone down."
According to Wolfe, much of the interchange debate has focused on large retailers, but smaller merchants have been hit hardest because most lack adequate capital reserves. "They don't have the corporate backing," she said, adding that escalating fees can even threaten the survival of small businesses.
Garner elaborated: "Our smallest supermarket members saw a 35 percent increase on their cost of accepting just one PIN debit card network last year alone," she said. "That's the smallest supermarkets. Ultimately, that type of increase is going to impact our customers."
Garner added that the card companies' fee structures "are different based on volume, the type of merchant, the type of transaction it is, but we've seen exponential increases.
"That's why it's so important for us that this process plays out at the Federal Reserve, because any month we delay reform, it costs merchants and consumers ultimately close to $1 billion."
Biff Matthews, President and Founder of CardWare International said, "The large merchants have always had the ability to negotiate better rates, but I think this will provide some opportunities for smaller merchants to participate in that a little better. Whether or not those savings to either merchant is passed on to the consumer is still very speculative."
Furthermore, Matthews noted, "More ISOs today are doing pass through, so any reduction is going to go to the merchant's bottom line. I wonder, too, especially from a standpoint of revenue, not only for the ISO, but also for the merchant level salesperson, because their net income is based in large part upon the interchange, are they going to pass that through to the merchant? Don't know."
He also believes card companies and financial institutions are likely to offset any revenue losses incurred through the new regulations with fee increases elsewhere. With about a month to finalize debit interchange regulations, Matthews said, "There very well could be a delay to allow for some initial refinement of the legislation to accurately reflect what the intent was."
"And, depending on how the final legislation is drafted, I would expect to see some lawsuits," he said.
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