WASHINGTON– After indicating it may consider the issue, both the National Retail Federation and the Merchants Payments Coalition are urging the Federal Reserve to approve lowering its 21-cent cap on debit card “swipe” fees when its Board of Governors meets next week to consider proposed regulations on the issue.
The Fed announced it will meet on Oct. 25 to consider “proposed revisions to the Board’s debit interchange fee cap.” Details of the proposal were not released.
The organization noted the amount large banks and card networks charge retailers to process debit card transactions has been capped at 21 cents – plus one cent for fraud prevention and 0.05% of the transaction amount to cover fraud costs – since 2011. The cap applies only to cards issued by financial institutions with at least $10 billion in assets.
The NRF reminded that under the 2010 Durbin Amendment, Congress directed the Fed to adopt regulations requiring that debit card swipe fees be “reasonable” and “proportional” to financial institutions’ costs.
What the Fed Found
The Fed found the average cost was about eight cents per transaction and proposed a cap of up to 12 cents “but settled on 21 cents after lobbying by banks,” the NRF said.
The NRF further noted the Fed was required to review the cap every two years but has kept it the same even though banks’ average cost has steadily fallen, dropping to 3.9 cents as of 2019, the most recent year for which the Fed has released data.
‘Reasonable & Proportional’
“Congress told banks a dozen years ago that debit card swipe fees should be ‘reasonable and proportional’ but they’ve never been either,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said in a statement. “It’s time to set the cap that Congress intended and recognize that banks’ costs to process transactions have dropped significantly. Doing so would reduce costs for retailers and give them more savings to share with their customers by holding down prices in a time of inflation. These fees have been too high for too long and we’re glad to see the Fed is finally ready to act.”
According to the NRF, the cap cut the typical debit swipe fee in half and has saved retailers an estimated $9 billion a year, with studies showing retailers have shared at least 70% of the savings with customers.
But the NRF also noted it has long argued that the savings could have been much larger if the cap had been set lower or periodically adjusted as intended by Congress.
Prior Lawsuit Filed
NRF sued the Fed in U.S. District Court in 2011, saying the cap was set too high. A trial judge agreed but the ruling was overturned by the U.S. Circuit Court of Appeals for the District of Columbia, and the Supreme Court refused to hear NRF’s appeal. The Supreme Court agreed late last month to take up a 202 challenge to the cap brought by a North Dakota retailer and decide whether the statue of limitations has expired, the NRF stated.
“Debit and credit card swipe fees have doubled over the past decade and totaled $160.7 billion in 2022, according to the Nilson Report,” the NRF said. “The fees are among most merchants’ highest operating costs and drive up prices paid by consumers by more than $1,000 a year for the average family. Debit card swipe fees account for $34.4 billion of the total.”
MPC: ‘Didn’t Go Far Enough’
Similarly, the Merchants Payments Coalition also welcomed the announcement by the Federal Reserve.
“Debit cards are an electronic version of checks that have saved banks billions compared with handling paper checks, but swipe fees make them much more expensive for merchants and drive up prices for consumers,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “The Fed tried to address high debit card fees over a decade ago, but didn’t go far enough, and banks’ costs have continued to fall while fees have stayed the same. It’s time for the Fed to update how much banks are allowed to charge and recognize that consumers, merchants and the economy can’t afford overinflated fees.”
The MPC cited Nilson Report data that found debit card swipe fees cost merchants and their customers $34.4 billion in 2022, up 5% from 2021.
More Than $160 Billion
“When all types and brands of cards are included, credit and debit card swipe fees totaled $160.7 billion in 2022 and had more than doubled over the previous decade,” the MP said. “The fees are most merchants’ highest operating cost after labor, driving up consumer prices and amounting to over $1,000 a year for the average family.”
Are You Being Gouged for Bank-Like Subscription Fees for Old News? Here’s a CU-Like Way to Fix That
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So, stop paying those bank-fee-like subscription prices from other so-called “news”” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?