Interchange Fee Amendment - May 14, 2010

An open letter to members from NRF President and CEO Matt Shay:

On May 13th, the U.S. Senate adopted the Durbin interchange fee amendment to the Financial Reform bill by an overwhelming bipartisan vote of 64 to 33. Adoption of this amendment is an important milestone in our continuing effort to rein in ever-rising debit and credit card swipe fees.

The Durbin amendment focuses primarily on debit card fees, which NRF estimates cost merchants more than $10 billion dollars just in the past year alone. The amendment requires the Federal Reserve to set “reasonable and proportional fees” for debit cards (which are essentially “plastic checks”) just as the Fed has done for paper checks. This provision could collectively save NRF member companies billions of dollars in the coming years.

But the amendment does more. Other provisions begin to crack open the door to competition in the payment market, which could lower costs further. For the first time, it would suspend some of the multitude of conflicting rules and requirements that credit card companies have imposed on retailers and restaurants that limit our ability to encourage customers to use cheaper forms of payment. And, of particular benefit to smaller merchants, the amendment makes it clear that credit card companies can no longer prevent merchants from setting minimums or maximums on credit transactions. Currently, the card fees on small ticket purchases exceed many businesses’ profit margins. Card companies essentially force merchants to give goods and services away for free. If the underlying bill, S. 3217, the Restoring American Financial Stability Act of 2010, is finally passed and adopted by Congress, that particular credit card practice would come to an end.

There is still quite a road ahead. S. 3217 must pass the Senate, and it may need to be conferenced with the House passed version of Financial Reform. We know the banks and card companies will do everything in their power to strip retail and customer-friendly provisions from any final law. But that is down the road.

As stated in my initial letter, my goal for NRF is to strengthen our industry’s voice, raise our industry’s visibility on Capitol Hill, and deliver value to the NRF membership. This vote is an example of what can be achieved if you will continue to participate and invest in our advocacy efforts. This strong vote could not have been achieved without the support of retailers around the country, the excellent work of our team here in Washington, and frankly, the fact that it coincided so closely with our Washington Leadership Conference fly-in. To build and complete this victory, we will need your redoubled help.

If you think this Senate vote was impressive, just wait until we really get going. I look forward to the challenge.