Inside This Issue - News
Swipe fee vote a win for retail
June 27th, 2011
WASHINGTON – In a triumph for retailers, the Senate has refused to delay cuts to debit card swipe fees.
Despite a lobbying blitz by the banking industry, the Senate let stand new rules curtailing the fees that banks and credit card networks can charge retailers to process debit card transactions.
The National Association of Chain Drug Stores joined other trade associations in applauding the defeat of an amendment that would have delayed implementation of the cuts, which will take effect in July.
The fees amount to “about $500 every year per household,” NACDS vice president of federal government affairs Paul Kelly said on Fox News.
The amendment’s defeat is “a huge victory for retailers and consumers,” NACDS president and chief executive officer Steve Anderson stated.
“Retailers and consumers have the most to lose without swipe fee reform, and we are pleased that implementation of that reform can continue without further delay,” he said.
Debit card swipe fees, or interchange fees, have more than tripled over the last decade, costing retailers about $50 billion a year in added costs. NACDS utilized its grassroots advocacy program, NACDS RxImpact, to engage pharmacy advocates to act quickly to defeat the amendment to ensure that the Federal Reserve Board issues new swipe fee rules.
“NACDS has consistently opposed efforts to prevent the implementation of swipe fee reform, engaging with key lawmakers and activating its robust grassroots efforts to prevent this delay,” Anderson said, singling out Sen. Dick Durbin (D., Ill.) for pushing the issue in Congress and ensuring the amendment was turned back.
Food Marketing Institute president and chief executive Leslie Sarasin commended the 45 senators “who voted to support their neighborhood grocery stores and their customers.”
Sarasin added that consumers “will see savings returned to their pockets once this rule is finalized. This is a critical issue to the survival of small businesses. Since 2008, more than 1 million businesses have failed, costing 3.6 million jobs, and many report the growth of swipe fees as a strong contributor to their demise.”
Retail Industry Leaders Association president Sandy Kennedy thanked the Senate for “standing up for Main Street and protecting reforms that will help fix the broken debit market.
“These bipartisan reforms will bring meaningful relief to millions of merchants and consumers at this critical time,” Kennedy noted.
The amendment to delay the cuts’ implementation, sponsored by Sens. Jon Tester (D., Mont.) and Bob Corker (R., Tenn.), received 54 votes, six short of the amount needed for passage. Banks favoring the measure marshaled hundreds of thousands of dollars in political contributions and dozens of lobbyists to rally support.
The defeat of the amendment was viewed as a carryover of anti-bank sentiment from the financial crisis.
“This is an historic moment … when we decide whether or not the big banks are going to lose and the consumers are going to win,” said Durbin, whose original measure Tester and Corker were seeking to overturn. A delay would have given banks “a windfall of profit that they do not deserve,” Durbin noted.
Retail advocates opposing the delay harnessed consumer frustration over the sagging economy. Trade organizations likened the fee, which averages 1% to 2% of the price of each purchase, to a hidden tax.
The Federal Reserve has drafted rules that would cut the fees from an average of 44 cents per transaction to a maximum of 12 cents. The final regulations have yet to be issued. But the proposed cut was more than banks had feared, and they vigorously attacked the law.
Financial firms and their trade groups argued that they could not cover the costs of preventing debit card fraud with a 12-cents-a-swipe charge.