WASHINGTON -- U.S. Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, has introduced the Financial CHOICE Act, the Republican alternative to the Dodd-Frank Act that seeks, among other goals, to repeal debit-card reforms created by the Durbin Amendment to the Dodd-Frank Wall Street Reform Act.
“NACS is deeply disappointed that Rep. Hensarling will try to repeal debit swipe fee reform. Repeal would allow the credit card Goliaths to resume price-fixing of debit-card fees and block smaller card networks from competing with them for business," said Lyle Beckwith, senior vice president of government relations of the National Association of Convenience Stores (NACS).
“Even with reform, the dominance of the Visa-MasterCard duopoly means retailers and consumers in the United States pay the highest swipe fees in the world—up to seven or eight times European levels. Without the vital protections of debit reform and the small measure of competition it has introduced to the market, consumers would face higher prices and smaller merchants would face even greater burdens—especially convenience store owners. Higher swipe fees, which on average are the fastest-growing expense and second-largest operating cost for retailers, cost American consumers tens of billions of dollars every year,: he said. “We strongly urge Congress to put the interests of merchants and consumers ahead of the credit card giants by voting against the Financial Choice Act.”
Since being signed into law in 2010, debit interchange or “swipe” fee reforms have saved consumers nearly $6 billion per year and supported more than 37,000 jobs per year, according to NACS.
Debit reform limits price-fixing by the card networks and largest issuers by setting a reasonable fee for those with $10 billion in assets or more (approximately 1.6% of banks). Debit reform also fosters competition among debit networks by obligating banks to allow merchants to choose their own network routing option for each debit transaction.
In recent months, the association has alerted convenience-store and fuel retailers that Hensarling has been garnering support for his bill.
U.S. Rep. Randy Neugebauer (R-Texas) also has introduced a stand-alone bill, H.R. 5465, which would repeal the Durbin Amendment created by U.S. Sen. Richard Durbin (D-Ill.).
Earlier this month, more than 400 retailers, including many NACS-member convenience-store companies, sent a letter to Congress asking them to protect debit-card reforms. Members of the National Grocers Association (NGA) also signed the letter.
“As cornerstones in the business community, we are staunch supporters of free enterprise, and generally do not support any market intervention unless markets are not functioning efficiently. Credit- and debit-card acceptance is a prime example of a nonfunctioning marketplace,” the letter said. “Debit-card reforms have been a major step in the right direction, and any removal of those reforms would be a monumental step in the wrong direction for U.S. businesses and consumers.”
According to the Merchants Payments Coalition (MPC), if debit reform is repealed, global card companies would tighten their control on the debit marketplace to prevent choice and price-fix fees at massive markups. Exorbitant swipe fees raise the price of everything consumers buy, whether they use a card, which hurts consumers and businesses large and small.
According to Hensarling, “the Durbin Amendment, which was inserted into the Dodd-Frank Act without adequate congressional deliberation, is a price-fixing scheme that picks winners and losers in the marketplace. The Durbin Amendment has resulted in the elimination of free checking accounts at banks, pushing vulnerable Americans out of the mainstream banking system, while providing no discernible benefit to retail consumers.”
The Financial Services Committee will begin meeting on Sept. 13 to debate the Financial CHOICE Act, consider possible amendments and vote on the legislation.
Founded in 1961 as the National Association of Convenience Stores, NACS has 2,100 retail members.
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