Swipe-Fee Reform Clears Last Hurdle
By July 21, merchants’ fees for debit-card transactions, or swipe fees, will go down.
The July start date for swipe-fee caps follows the defeat of a bill in the U.S. Senate, the “Debit Interchange Fee Study Act of 2011,” which would have delayed the cap for two years. The bill needed a majority of 60 votes to pass, but it came up six votes short when the Senate took action on the bill June 8. Support and opposition for the bill were bipartisan. Fees for credit cards were not included in the legislation.
The vote could be the last hurdle for swipe-fee reform. It was part of the financial-overhaul bill that passed the Senate in July 2010. The overhaul bill’s Durbin Interchange Amendment mandated that debit-card swipe fees, or the fees charged every time a consumer uses a debit card, must be regulated by the Federal Reserve into a charge that is “reasonable and proportional” to a purchase.
In December, the Fed recommended that debit-card swipe fees be reduced from their current level of 1 percent to 2 percent of each transaction to a flat fee of no more than 12 cents for large banks that adhere to fee schedules set by credit-card companies. Currently, banks charge an average of 44 cents per debit-card transaction. The cap could mean that banks and credit-card companies might lose $16 billion annually from swipe-fee revenue, according to a study by the Fed.
Retail trade groups cheered the June 8 Senate vote. “These bipartisan reforms will bring meaningful relief to millions of merchants and consumers at this critical time,” said Sandy Kennedy, president of the Retail Industry Leaders Association, in a statement.
Said Matthew Shay of the National Retail Federation: “With the economy still trying to gain momentum and consumers facing skyrocketing costs for necessities like food and fuel, this badly needed reform will help ensure our nation’s economic recovery.It will prevent more than $1 billion dollars a month from being pocketed by big banks and, in turn, allow retailers to hold down prices for consumers.”
The American Bankers Association issued a statement that the vote would benefit big retailers and hurt small banks. “The Senate has essentially said it is fair for one industry to reap what another has sown, and American consumers will now have to pay more for basic banking services, while big-box retailers go off and count their unjustified profits. Community banks—the backbone of local communities—will suffer the most,” said Frank Keating, president of the ABA.—Andrew Asch
