WASHINGTON -- The Merchants Payment Coalition (MPC), a group fighting to protect retailers from unfair debit- and credit-card fees, said in a press statement that the Federal Reserve Board has "refused ... to protect consumers and merchants from a 500% markup levied by banks and credit-card companies every time someone swipes a debit card. The fees directly impact the cost of consumer prices and merchants' ability to hire employees and keep their doors open."
The MPC statement was in response to a press release from the Fed indicating that it does not plan to alter rules governing the fees debit-card issuers receive from merchants following a new report that showed sharp declines for most interchange fees
The Fed found that while debit swipe-fee reforms in the Durbin Amendment protected the smaller banks and credit unions from losing revenue, the fees paid to large banks by merchants and their customers are five times the actual cost the banks incur to swipe the card. The Durbin Amendment reduced debit-card swipe fees paid to large banks by half but exempted smaller institutions.
The average cost to process a debit transaction is five cents, the report found, yet the average actual fees collected on such transactions is 24 cents.
"This report shows that the Fed made a mistake in implementing an effective law. Consumers and merchants should be benefiting more from the reforms," said Jennifer Hatcher, senior vice president of government and public affairs for the Food Marketing Institute (FMI), and a member of the MPC.
"No merchants in a competitive marketplace mark up their products and services by 500%. They would be put out of business. It should be the same for banks and credit-card companies."
Debit swipe-fee reform, passed by Congress in 2010, required the Fed to ensure that the fees charged to merchants that accept debit cards, be "reasonable and proportionate" to the cost of the transaction. The law exempted 99% of all banks and applied only to those banks with more than $10 billion in assets. In 2011, the Fed imposed rules that capped debit swipe fees for nonexempt institutions at roughly 24 cents.
Debit-card fees, as well as credit-card fees, have skyrocketed upward even as banks' costs have been falling, according to MPC.
Merchants paid banks more than $30 billion last year in credit-card swipe fees--money that could have been used to create jobs and lower prices, said MPC. If the federal government would step in and stop the price fixing, consumers could benefit from reduced swipe fees, as in Europe where they are eight times lower.
Merchants do not know what the fee will be when a customer swipes a credit card until they get their bank statement. There are around 300 different fees, depending upon the type of card and the merchant accepting it. Consumers pay roughly $460 a year in swipe fees through higher prices, MPC said.
The banks that issue cards are Visa and MasterCard's customers, not the consumers who use the cards, said the group. Under the current system, Visa and MasterCard are motivated to keep banks happy, not consumers, MPC alleged.
The MPC is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, online merchants and other businesses who are fighting against unfair credit-card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.
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