Merchants Mark Fifth Anniversary of Debit Competition

Retailers celebrate the passage of debit-card transaction reform.

September 30, 2016

WASHINGTON, D.C. – Today marks the fifth anniversary of reforms that brought competition to the debit-card market. In 2010, Congress passed debit reform that ended the practice of Visa and MasterCard blocking their competitors from handling debit-card transactions for merchants.

Reform also created incentives for banks to set their own fees for this service rather than relying on central price-fixing by the card brands. Federal Reserve regulations implementing these pro-competitive reforms went into effect Oct. 1, 2011.

“Debit reform brought free market principles to what was a broken market characterized by price-fixing,” said Greg Ferrera, senior vice president of government relations and public affairs at the National Grocers Association, a member of the Merchants Payments Coalition, in a press release. “Everyone has been better off since the giant card companies can no longer block competition and price-fix fees.”

The Philadelphia Federal Reserve, the federal Government Accountability Office and others have studied these reforms and found the competition brought to debit cards has benefitted consumers, merchants, small banks, credit unions and the economy overall. In its first year alone, debit reform saved consumers nearly $6 billion. Those savings supported 37,000 jobs.

Unfortunately, these free-market reforms are under assault by the nation’s largest banks and credit card companies. Earlier this month, the House Financial Services Committee narrowly passed the Financial Choice Act over bipartisan opposition. “Were Congress ever to vote in favor of a return to price-fixing and blocks on competition, it would be a slap in the face to consumers, Main Street businesses and the free-market principles undergirding the U.S. economy,” Ferrara said.

In letters to Congress, almost 200 trade associations and more than 400 retailers employing millions in every congressional district nationwide said recently: “The facts are clear. Debit reforms are working and, if anything, Congress should act to strengthen them or address the excessive and hidden credit card fees American consumers and merchants pay every year.”

This week, Sen. Richard Durbin (D-IL) and Rep. Peter Welch (D-VT) wrote an op-ed to highlight the benefits of debit swipe fee reforms enacted more than six years ago, as well as shine a light on the motives behind why Visa, MasterCard and large banks have ramped up efforts to repeal meaningful swipe fee reforms.

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