WASHINGTON – Yesterday, American Banker published a piece by NACS Senior Vice President of Government Relations Lyle Beckwith, explaining the disappointing outcomes of congressional swipe fee reform.
As Beckwith writes:
“Unfortunately, the Fed was swayed by heavy bank lobbying as it wrote the rules to implement the new law, settling on language that allows Visa and MasterCard to keep fees that are way too high. Now, according to a Richmond Fed study released in August, only 10% of 420 retailers surveyed reported that their fees had dropped two years after the law went into effect in October 2011. The other 90% saw no change, were uncertain of the impact or actually faced higher fees.
This lack of change clearly goes against congressional intent, proving that the Fed made a mistake in appeasing big banks and credit card companies.
Even the least efficient banks are making a 500% profit on the fees they charge merchants to process debit card transactions, according to figures that the banks report to the Fed and analyzed by the Merchant Advisory Group, a trade association. Moreover, these are just the margins on the rates regulated by the Fed. Most banks aren’t covered by the regulations—and credit cards aren’t covered at all. So, the real profit margins from so-called swipe fees are actually many times higher than 1,000%.
This isn't just a problem for retailers. Higher fees also translate into higher prices for consumers. The fees inflate the cost of everything from gas to groceries to haircuts to restaurant dinners. The higher fees also prevent retailers from expanding or hiring as much as they would like, thereby putting a crimp in the entire U.S. economy.
This has all happened because Visa and MasterCard work with their banks to fix the fees that the banks charge merchants on debit and credit transactions. Such price-fixing is the most basic violation of antitrust law and American free enterprise. But the credit card companies still do it.
Nowhere else in our free-market system do such uncompetitive practices flourish. The results are clear: American merchants pay seven or eight times the two- or three-tenths of a percent that European merchants pay in debit and credit card swipe fees. That's because the European Union has vigorously enforced its antitrust laws.”
Read Beckwith’s complete editorial, here.