NACS called yesterday’s release of the Federal Reserve’s proposed rulemaking related to debit card swipe fees a “positive step” and said it will continue to push for the reforms demanded by Congress and consumers alike. While no interchange fees should be allowed on debit transactions, the Fed's proposal demonstrates real progress toward that reasonable goal — and parity between checks and debit cards.
“The proposed rules are a positive step in addressing the anti-competitive behavior of the banks and credit card companies and an acknowledgement of the voice of American small businesses and consumers,” said NACS President and CEO Hank Armour. “This is what 5.4 million of our customers had in mind when they signed petitions demanding reform.”
When Congress approved the financial services reform bill this summer, it directed the Federal Reserve to issue rules to ensure that debit swipe fees are reasonable and proportional to the processing costs incurred. Visa and MasterCard currently charge debit swipe fees of around 1 percent to 2 percent of the transaction amount — among the highest rates in the industrialized world.
A number of independent research reports have confirmed what retailers have long argued: Swipe fees are considerably more than the actual cost of processing transactions and provide no commensurate benefits to retailers or consumers. In 2008 alone, Americans paid more than $48 billion in swipe fees. These fees are non-negotiable and set in secret by the credit card companies and their member banks, and increase the cost of goods and services purchased by consumers. Retail experts have long argued that costs to process debit transactions, which are essentially electronic checks, should be in line with the fees charged to process paper checks.
The Federal Reserve Board is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer's costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a stand-alone cap (initially set at 12 cents per transaction). Under both alternatives, circumvention or evasion of the interchange fee limitations would be prohibited. The Board also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.
If the Board adopts either of these proposed standards in the final rule, the maximum allowable interchange fee received by covered issuers for debit card transactions would be more than 70 percent lower than the 2009 average, once the new rule takes effect on July 21, 2011.
The proposed rule would also prohibit all issuers and networks from restricting the number of networks over which debit card transactions may be processed. The Board is requesting comment on two alternative approaches: one alternative would require at least two unaffiliated networks per debit card, and the other would require at least two unaffiliated networks per debit card for each type of cardholder authorization method (such as signature or PIN). Under both alternatives, the issuers and networks would be prohibited from inhibiting a merchant's ability to direct the routing of debit card transactions over any network that the issuer enabled to process them.
According to the recently released 2010 Federal Reserve payment study, debit card use in the United States now exceeds all other forms of noncash payments and, by number of payments, represents approximately 35 percent of total noncash payments.
There now will be a 60-day comment period on these proposed rules. NACS and other organizations that are part of the Merchants Payments Coalition will carefully study the rules the Federal Reserve has proposed and offer its suggestions for strengthening the final rules, which the Federal Reserve expects to publish in April 2011 and go into effect June 21, 2011.
“Yesterday’s proposed rulemaking by the Federal Reserve begins to create a system in which debit swipe fees are reasonable and proportional to the processing costs incurred,” said Armour.
Click here for more information from the Federal Reserve.
NACS Staff Contact: Lyle Beckwith, lbeckwith@nacsonline.com
Last night the House passed and sent to the President H.R. 4853, the Reid-McConnell tax package, by a vote of 277-148. The date the President signs the bill will be the “date of enactment” or effective date for most provisions of the legislation.
The package includes a two year extension of the 2001 and 2003 tax cuts, a two year extension of an estate tax of 35% with a $5 million exemption, a two year extension of the 45 cpg ethanol credit, and a two year extension (one year retroactive) of the $1 biodiesel credit.
NACS Staff Contact: Corey Fitze, cfitze@nacsonline.com
Senate Majority Leader Harry Reid (D-NV) abruptly abandoned a $1.1 trillion omnibus bill last night as Republican support started to dwindle. Majority leader Reid was considering attaching the Online Gaming Bill which would allow for the online sale of lottery tickets to this omnibus budget bill. Democrats and Republicans are in frantic negotiations currently due to the fact that the federal government’s funding will be cutoff Saturday night if no action is taken.
Senate Minority Leader Mitch McConnell (R-KY) has introduced a measure aimed at keeping the federal government funded until February 18, 2011. McConnell’s continuing resolution would mean that the incoming Congress would be tasked with passing a budget.
Although it is unlikely we will see any movement of the Online Gaming Bill in 2010, NACS is following this issue closely.
NACS Staff Contact: Corey Fitze, cfitze@nacsonline.com
Incoming Chairman of the House Energy and Commerce Committee, Fred Upton (MI) announced yesterday the Representatives that would head up the five subcommittees that filter through proposed legislation and a sixth which has congressional oversight. An overwhelming majority of legislation that is important to NACS is considered by the Energy and Commerce Committee.
Chairman-elect Upton also announced some slight changes to the sub committees’ jurisdiction. The Energy and Power Subcommittee will handle all energy and Clean Air Act issues. The Environment and Economy Subcommittee will focus on environmental regulations and their effect on the economy.
The list of new posts is below:
Chairman Emeritus
Joe Barton (TX)
Vice Chair of Energy and Commerce
Sue Myrick (NC)
Subcommittee on Communications and Technology
Chair – Greg Walden (OR)
Vice Chair - Lee Terry (NE)
Subcommittee on Health
Chair - Joe Pitts (PA)
Vice Chair - Mike Burgess (TX)
Subcommittee on Energy and Power
Chair – Ed Whitfield (KY)
Vice Chair – John Sullivan (OK)
Subcommittee on Environment and Economy
Chair – John Shimkus (IL)
Vice Chair - Tim Murphy (PA)
Subcommittee on Commerce, Manufacturing and Trade
Chair – Mary Bono Mack (CA)
Vice Chair - Marsha Blackburn (TN)
Subcommittee on Oversight and Investigations
Chair – Cliff Stearns (FL)
NACS Staff Contact: Julie Fields, jfields@nacsonline.com
Earlier this week a federal district court in Ohio forbid the Alcohol and Tobacco Tax and Trade Bureau (TTB) from requiring retailers who allow customers to make cigarettes using "Roll Your Own" machines to obtain permits from TTB to engage in such business and pay taxes on cigarettes produced.
Thus, for the time being, retailers may continue permitting customers to use these machines without obtaining a permit and paying taxes on cigarettes that customers produce. NACS members are advised, however, that the court's injunction is pending the outcome of ongoing litigation, and should TTB prevail in this litigation, it is expected that they will seek to collect these taxes retroactively.
NACS Staff Contact: Corey Fitze, cfitze@nacsonline.com