NRF Expresses Deep Disappointment in Federal Reserve for Watering Down Swipe Fee Reform
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NRF Expresses Deep Disappointment in Federal Reserve for Watering Down Swipe Fee Reform Shay: “American Consumers Suffered a Major Loss Today”
WASHINGTON, June 29, 2011 – The National Retail Federation today expressed serious disappointment in the final debit card swipe fee regulations set today by the Federal Reserve, calling it a major loss for American consumers. Under the new rule, the current debit card swipe fee rate of 1-2 percent of each transaction – about 44 cents on the average retail purchase but several dollars on bigger-ticket items – will be replaced with a flat fee of not more than 21 cents per transaction for the nation’s largest banks. That is significantly higher than the flat fee of up to 12 cents the Fed originally proposed in December 2010.
“American consumers suffered a major loss today,” said NRF President and CEO Matthew Shay. “We are extremely disappointed that the Federal Reserve chose to be influenced by special interests and ignored the will of Congress and American consumers. While the rate will provide modest relief, it does not go far enough.”
“While we are disappointed that the Fed did not follow through to the full extent of swipe fee reform, we take some comfort in knowing that we were able to shine a light on these deceptive practices and bring some relief to merchants and their customers,” Shay said. “Even though this rule is specific to debit cards, we are hopeful that it leads to more transparency and relief from credit card swipe fees as well.”
“The Federal Reserve very clearly did not follow through on the intent of the law,” said Mallory Duncan, NRF Senior Vice President and General Counsel. “This rule is unacceptable to Main Street merchants and consumers who were counting on the Fed to issue a reasonable and proportional rule. Unfortunately, this rule does not meet those qualifications.”
While the new regulations are a step forward, NRF has argued that debit card transactions should be honored at or close to face value since debit cards function as plastic checks that draw from the same bank accounts as paper checks. Debit and credit card swipe fees together amount to about $50 billion a year, and drive up prices by an estimated $427 a year for the average household because of card industry prices that effectively require the fees to be included in the price of merchandise. Retailers will now be able to offer modest discounts to customers who pay with debit cards under the new, lower fees.
Banks that set their own rates rather than following industry fee schedules will be free to charge any fee they believe the market will bear. Financial institutions with less than $10 billion in assets will be exempt, but retailers have made clear that they will continue to accept cards from all banks just as they have done in the past.
Today’s action comes exactly three weeks after the Senate rejected an amendment that would have delayed swipe fee reform by at least a year and required the Fed to write regulations more in favor of the banks. The amendment was defeated after NRF launched a nationwide lobbying, grassroots and media campaign that countered misinformation and threats of retaliation against consumers spread by the banks.
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 2010 sales of $2.4 trillion. www.nrf.com