NRF to Fed: Debit swipe fee cap still too high

Dive Brief:

In a letter to U.S. government agencies last week, the National Retail Federation helped stoke the battle over debit card swipe fees enacted by the Federal Reserve five years ago.
The NRF said that although a new law under the Dodd-Frank banking reform act meant to limit swipe fees has helped somewhat, the charges remain too high and fail to fulfill Congress’s goal of appropriately limiting them.
The letter was sent as Sen. Dick Durbin (D-IL), who has sponsored an amendment to Dodd-Frank that would lower the fees, also filed a letter asking whether EMVCo—the consortium of six credit card issuers that sets the fees—is hindering competition in electronic payments.

Dive Insight:

For the past five years and counting, retailers have been frustrated by the Federal Reserve's intepretation of a new law under the Dodd-Frank banking reform act that is meant to limit swipe fees, arguing that the charges should be even lower.

“In most cases, 24 cents per transaction represents a significant savings over the prior non-competitive pricing,” NRF SVP and general counsel Mallory Duncan said in a letter to the Federal Reserve, which is reviewing the cap based on requirements of the federal Paperwork Reduction Act. “However, it is still substantially higher than issuers’ incremental costs.”

Merchants have passed along two-thirds of the $8.5 billion in annual savings to consumers but maintain there would be even more money to share if the Fed had established the cap at the level anticipated by lawmakers, Duncan added.

Despite having an advocate in Congress in Durbin, and despite some favorable court actions, retailers haven’t made much headway in the matter. After a 2013 settlement of the dispute in U.S. District Court, many larger retailers said the agreement didn’t reflect the needs or answer the arguments of several retailers and their customers. In the summer of 2014, a U.S. District ruling that some 30 lawsuits by retailers against Visa and MasterCard over swipe fees could go forward despite that settlement has kept the issue alive.

Earlier this month, Durbin filed a letter questioning whether the credit card swipe fees that large banks and card issuers charge are limiting competition in electronic payments. The Illinois Democrat requested information on EMVCo, whose six members—American Express, Discover, JCB, MasterCard, UnionPa, and Visa—handle $50 billion in swipe fees each year. Retailers believe that credit transactions made using EMV cards should carry the same, lower swipe fees charged for debit transactions.