Banks Aim to Repeal Swipe Fee Reform

An op-ed slams Congress for even considering jettisoning the Dodd-Frank legislation.

October 26, 2016

WASHINGTON, D.C. – While Congress has taken Wells Fargo to task for its snafu involving fake bank accounts, a House committee recently voted to repeal “a five-year-old Federal Reserve limit on price fixing that has cut debit card swipe fees in half,” wrote Mallory Duncan, senior vice president and general counsel of the National Retail Federation and chairman of the Merchants Payments Coalition, in an opinion piece for The Hill. The change is hidden in the Financial Choice Act.

NACS strongly opposes the misnamed Financial Choice Act because it includes the repeal of the highly effective, pro-competition and pro-consumer debit swipe fee reform. As Duncan put it, “The Fed’s cap has saved consumers about $6 billion a year, but repeal means that those savings would be lost. Credit and debit card swipe fees that banks charge merchants to process plastic transactions are a huge but obscure practice few people know about. … If people knew how much these fees cost them in higher prices and hurt their local merchants, they would be outraged and Congress would hear about it.”

Duncan went on to explain how much the fees cut into the slim margins within which most retailers—including convenience store and gasoline stations—operate. “Because retailing is so competitive and transparent, merchants’ profits are notoriously small—most earn only a penny or two on a $1 sale. That means they can’t absorb a $4 fee on a $100 purchase and have to build the cost of these fees into prices or go out of business. Since they don’t know when they set prices whether a customer will pay cash or credit—and credit card companies have made cash discounts difficult—that means everybody pays more,” he wrote.

NACS has pledged its support to halt this bill so long as the debit reform repeal is in it “and ensure that members of Congress and the Senate recognize the success of this vital reform in re-establishing competition in the debit-card market,” said Lyle Beckwith, NACS senior vice president of government relations, in a statement released last month in response to the new legislation.

Advertisement
Advertisement
Advertisement