Retailers Could See Changes to Interchange Fees, Interstate Tax Requirements
Efforts to reform interchange fees cleared another hurdle when the House of Representatives approved H.R. 4173, the Dodd-Frank Wall Street Reform Act of 2010, on June 30 in a 237–192 vote.
The landmark bank reform bill includes the Durbin Interchange Amendment, sponsored by Senate Majority Whip Richard Durbin (D–Ill), which will regulate the $20 billion-per-year debit interchange fee system. These interchange fees, also called swipe fees, are charged to every retailer when customers purchase goods with a debit card.
Advocates for the Durbin Amendment said the proposed measure will help merchants control their costs when dealing with credit card companies and card-issuing banks. These companies often charge fees for debit card use, which can range from 1 percent to 2 percent of the transaction fee. Some retailers complained that these fees are often much higher than the actual cost of processing debit transactions.
The Durbin Amendment requires that interchange fees be proportional to the cost of the transaction for debit cards issued by banks with assets over $10 billion. The law requires the Federal Reserve to determine what is fair and proportional. The amendment also allows merchants to offer customers discounts for use of cash, checks and debit cards. Merchants also can set a $10 minimum for credit card transactions without penalty from card networks. These provisions will enable small businesses to bring their interchange costs under control and to pass savings on to consumers in the form of discounts, according to the bill’s advocates.
Card-issuing banks and credit card companies stand to lose with this proposed legislation, according to New York–based financial-services trade journal Payments Source. In a June 24 article, it said card issuers’ potential losses from this proposed legislation could range from $5 billion to more than $10 billion annually and that new interchange rates might be 25 percent to 75 percent lower than present levels.
Consumer advocate Ed Mierzwinski of the U.S. Public Interest Research Group applauded the vote. “The Durbin swipe-fee vote was a big victory for merchants and consumers over unfair bank practices,” he wrote in an e-mail. “The bill gives Federal Reserve authority to ensure that debit-swipe fees are fair and allows merchants to avoid unfair card-network rules that prohibit them from offering discounts for cash or to suggest lower cost forms of payment.”
National Retail Federation also cheered the amendment. “The conference committee has struck a blow for retailers and their customers,” NRF Senior Vice President and General Counsel Mallory Duncan said in a prepared statement. “For years, these soaring fees have been taking billions of dollars out of consumers’ pockets and driving up prices. This is unsustainable. With this conference report in hand, Congress has an opportunity to stand up for Main Street businesses and consumers and rein in the greed of the big Wall Street banks and credit card companies.”
The Senate scheduled to take a vote on the bill after the July 4 recess.E-tail Faces Changes to Interstate Tax Requirements
In other legal news, a difference between the way physical retailers and e-commerce retailers are taxed might be changed. Since the 1990s, e-commerce stores have not been required to report state sales tax. On July 1, the Main Street Fairness Act of 2010 (H.R. 5660) was introduced in the House of Representatives by William Delahunt (D–Mass.). The bill would require e-commerce retailers to report state sales taxes. The proposed law received applause from trade group Retail Industry Leaders Association and its vice president for state government relations, Joe Rinzel. “[The Main Street Fairness Act] will ensure the fair and equal collection of sales taxes by retail businesses of all types and sizes, whether at a storefront or purely online,” he said.
