NRF Says Federal Reserve Action on Debit Cards Could Lead to Discounts for Consumers
WASHINGTON, December 16, 2010 – The National Retail Federation welcomed proposed regulations released today by the Federal Reserve intended to result in “reasonable” swipe fees for debit cards, saying a significant reduction in the fees would result in lower costs for merchants and could lead to discounts for their customers.
“Any reduction in debit card swipe fees at all, large or small, is a benefit for consumers because retailers are highly competitive and will share that savings with their customers – but the law requires a major reduction,” NRF Senior Vice President and General Counsel Mallory Duncan said. “The combination of reducing rates and allowing retailers to offer discounts will go a long way toward stopping the current scheme where big banks take a bite out of consumers’ wallets every time they use a debit card.”
“These regulations are a significant step toward reining in credit card industry fees that have driven up prices for consumers for far too long, but we still believe debit card transactions should be honored at face value the same as checks,” Duncan said. “Debit cards are merely plastic checks that draw from the same bank accounts as paper checks, and there’s no reason they should be treated any differently. We will work closely with the Fed as these regulations are finalized to ensure that the reduction in fees – and the amount of money retailers can offer customers as a discount – is maximized.”
The Fed this afternoon released proposed regulations intended to implement the Durbin Amendment, a provision of the Dodd-Frank Wall Street Reform Act of 2010 signed into law in July. Sponsored by Senate Majority Whip Richard Durbin, D-Ill., the amendment required the Fed to set regulations resulting in “reasonable and proportional” swipe fees for debit cards. The Fed was required to consider banks’ actual costs for processing the transactions and the fact that paper checks drawn on the same accounts are paid at face value. The amendment also barred the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit card, and allows merchants to set minimum purchase amounts of up to $10 for credit cards.
The proposed regulations will be subject to a 60-day comment period, and the Fed is scheduled to issue a final version by April 21, 2011, with the rule going into effect June 21, 2011.
Interchange is a fee averaging 1 to 2 percent for debit cards and 2 to 3 percent for credit cards that Visa and MasterCard banks charge merchants each time a card is swiped to pay for a transaction. The fees totaled $48 billion in 2008, three times the amount collected when NRF began tracking them in 2001, with debit interchange accounting for about $20 billion of the total. Card industry practices effectively require the fees to be included in the price of merchandise, costing the average family an extra $427 a year, according to NRF estimates. The fees are hidden from most consumers because they are not disclosed on monthly statements and card companies effectively block merchants from showing them on receipts.
As the world's largest retail trade association and the voice of retail worldwide, NRF's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. www.nrf.com