The National Retail Federation and retailers from across the country went to Capitol Hill today as Congress held a hearing on legislation that would repeal debit card swipe fee reform, telling lawmakers that reform has saved merchants and consumers more than $40 billion and should be protected.
The House Financial Services Committee is holding a hearing this morning on the Financial Choice Act, legislation sponsored by Chairman Jeb Hensarling, R-Texas, that would repeal debit swipe fee reform as part of a larger rollback of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
No retailers were invited to testify at the hearing despite the issue’s impact on the industry. But dozens of retailers are in Washington today for a fly-in organized by NRF and other retail groups to lobby against repeal and many attended the session. In addition, NRF submitted a statement for the record and is running digital ads and circulating petitions addressing consumer benefits, competition and retailers’ concerns that urge Congress to preserve debit card reform.
“Debit card reform has been a remarkable success,” said Mallory Duncan, senior vice president and general counsel of NRF. “It has saved retailers and their customers billions of dollars and it has brought the beginnings of transparency and competition to a market where swipe fees were price-fixed and all banks linked arms to charge the same high fees. If reform is repealed, the big banks will go back to those practices, and nothing will stop them from setting these fees as high as they like and driving up prices paid by consumers in the process.”
Debit reform was enacted as part of Dodd-Frank in response to the card industry’s practice of price-fixing the debit card “swipe” fees banks charge merchants to process transactions. The fees previously averaged 1-2 percent of the purchase amount, and virtually all banks that issue cards charged the same.
Under reform regulations that took effect in October 2011, large banks are limited to 22 cents per transaction, down from about 45 cents in the past. The limit saved retailers about $8.5 billion in the first year alone, with close to $6 billion of the savings passed along to consumers, according to a study by economist Robert Shapiro. Banks that set the fees competitively and independently are exempt from the limit, but virtually none have done so. Banks with under $10 billion in assets are also exempt.
“This has been settled law for the better part of a decade,” Duncan said. “We should be looking at the future of payments rather than trying to re-legislate this important consumer protection and vital step forward for fair market competition.”
The savings has been particularly important to small retailers, who say the fees are among their highest expenses.
A survey conducted for NRF last year found that 89 percent of consumers said the limit should remain in place. In addition, 84 percent said swipe fees should be set on a competitive basis rather than letting card companies set price-fixed fees.