NRF chimes in on financial reform bill passage
New York, July 16, 2010 --
Senate Vote Sends Landmark Swipe Fee Fix to President Obama
By J. Craig Shearman
Washington Retail Insight
July 15, 2010
Legislation requiring debit card swipe fees to be set at “reasonable” levels was sent to President Obama today as part of a sweeping financial services industry reform bill, marking the first time Congress has passed a measure intended to control the $48 billion in debit and credit swipe fees paid by retailers and their customers each year.
“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.”
Enactment of the legislation will bring retailers “relief from one of their largest expenses over which they have no control,” said Senate Majority Whip Richard Durbin, D-Ill., sponsor of the bill’s swipe fee provisions.
The Senate voted 60-39 this afternoon 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 237-192 on June 30 and now heads to Obama, who is expected to sign the measure next week.
All Democrats with the exception of Senator Russ Feingold of Wisconsin voted in favor of the bill, and were joined by three Republicans – Senator Scott Brown of Massachusetts and Senators Susan Collins and Olympia Snowe of Maine. All other Senate Republicans voted against the bill.
Final passage came with votes to spare since only a simple majority was required. But Brown, Collins and Snowe’s support was crucial earlier in the day when senators voted 60-38 to cut off opponents’ filibuster against the bill. Democrats control only 58 seats after last month’s death of Senator Robert Byrd of West Virginia, and Feingold’s refusal to support the legislation left Senate leaders scrambling for Republican support in the past few days to reach the 60 votes needed to pass the procedural motion.
The bill won House and Senate approval despite a massive lobbying effort by the banking industry to kill the measure. But NRF, which has sought swipe fee legislation for more than five years, responded with a grass roots campaign that delivered thousands of e-mails and phone calls from retailers to Congress urging lawmakers to support the swipe provisions. NRF also ran radio ads in key congressional districts across the country asking consumers to call members of the House and Senate, and members of the NRF Board of Directors met with key congressional leaders last month to voice support.
The 2,300-page bill includes a wide range of initiatives intended to prevent a repeat of the financial industry troubles that led to the recession of the past two years.
Among its provisions is 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.
Source: Company press release.