WASHINGTON -- In a potentially huge financial victory for convenience store retailers, members of the House and Senate reached an agreement to include debit-card swipe-fee cuts in the financial-overhaul legislation being finalized this week.
According to a report in The Wall Street Journal, members of the House and Senate announced an agreement Monday to include the debit-card fee cuts in the final version of the overhaul bill, placing control of the fees in the hands of the Federal Reserve.
The agreement includes minor, clarifying changes to the amendment's [image-nocss] language, which passed with a bipartisan majority in the Senate on May 13, offered by Senator Richard Durbin (D-Ill.) to rein in excessive debit-card fees. The legislation is expected to pass before July 4.
The deal reached Monday would keep most of Durbin's proposal in the final legislation that both houses must approve, but it allows the Fed to look at a broader range of factors, including fraud-prevention costs, when determining what fees card-issuing banks can charge.
The new language does relieve uncertainty for Visa and MasterCard by clarifying that the measure wouldn't restrict the fees that the debit-card processing networks charge to banks.
In another modification to the amendment, the interchanges fees associated with reloadable, prepaid debit cards would be regulated, which would protect the so-called unbanked from incurring more costs.
Also, the Fed will issue rules to prevent card networks from requiring that their debit cards can be used on only one network. This adds competition to the market and allows retailers to choose a debit network with the lowest cost.
Though it is unclear how much the estimated $20 billion a year in debit-card fees paid by U.S. merchants would be reduced under Congress' proposal to have them regulated by the Federal Reserveor what effect consumers might feelsome experts believe they could be cut by half or more.
According to preliminary numbers from the NACS State of the Industry Report of 2009 data, the convenience industry paid $7.4 billion in credit- and debit-card fees last year. NACS is backing the agreement, according to Lyle Beckwith, the association's senior vice president of government relations.
One of the retailers who testified in Washington, D.C., last week in support of the amendment was Wendy Chronister, president and CEO of six-store chain Qik-n-EZ, based in Springfield, Ill.
Chronister, who testified before the Senate Appropriations subcommittee on financial services and general government, which is chaired by Durbin, said the legislation would "create competition where there currently is none."
According to a report in the Springfield State Journal-Register, she said in her prepared testimony, "The real cost of the interchange fees is borne by the consumer because they inflate the prices of the products we sell."
The interchange fees charged by banks for Visa Inc. and MasterCard Inc. debit cards average roughly 1% to 2% of the total transaction amountfar more than similar fees to process paper checks. Such fees are regulated in dozens of countries, including France, Germany, Brazil and Mexico, but not in the United States, where they are more than twice as high as in Europe.
In arguing against the legislation, banks contend they will be forced to raise other types of fees and eliminate rewards on debit cards to make up for lost interchange revenue.
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