In a letter addressed to all members of the U.S. Senate, 134 trade associations endorsed the amendment (S. Amdt. 3932) to the Restoring American Financial Stability Act of 2010 sponsored by Durbin that will address excessive debit-card swipe fees and the [image-nocss] anti-competitive practices of credit-card companies and the big banks that issue their cards, said the Retail Industry Leaders Association (RILA).
"Higher interchange fees for businesses mean higher costs for retailers and consumers. Every time you make a purchase with plastic, the bank that issued your credit card gets a cut of the sale amount. American businesses and consumers are getting nickled and dimed by the big banks, who end up making billions from these hidden fees. Interchange fees need to be fairly and transparently negotiated between the merchants and the credit card companies who represent the banks' interests so working Americans don't get shortchanged."
Visa and MasterCard require an interchange fee of 1% to 3% of the transaction amount to be paid every time someone uses a debit or credit card. Visa and MasterCard then pass the money along to the banks that issue their cards, giving the banks an incentive to issue additional cards. Approximately $50 billion in interchange fees was collected in 2008, with about 80% of that money going to just 10 big banks.
"Banks love that money and they love the current interchange system," Durbin said.
Interchange fees are deducted from the transaction amount, meaning that when a business makes a $100 sale by credit or debit card, the banks and the card networks take a cut out of the sale amount and the business ends up with $98 or less. To make up for the interchange fees, businesses often either raise their prices or cut back on other expenses, like hiring.
In a normal market, banks would compete with one another to win merchant business by lowering interchange fees to cover only the processing costs. But the credit- and debit-card markets are not normal markets. Visa and MasterCard unilaterally set interchange fee rates that apply to all banks within their card networks. There is no negotiation between banks and merchants over reducing interchange rates. In fact, Visa raised many of its debit fees by 30% just last month.
"The setting of nonnegotiable rates by companies with overwhelming market power not only represents a failure of the market, it pinches the pocketbook of every American," Durbin said. "Congress needs to pass meaningful and comprehensive reform of interchange fees. American consumers and businesses deserve a fair shake from the credit-card companies."
He added, "These interchange fees have real-life consequences on Main Street. Small businesses and merchants deserve a credit- and debit-card system that works for them and their customers, not just the big banks and credit-card companies."
The "common-sense" amendment would free merchants of anti-competitive restrictions imposed by the credit-card companies, allowing merchants to offer discounts when customers use less expensive forms of payment. The amendment would also direct the Federal Reserve to issue regulations to ensure that swipe fees imposed on debit-card transactions are "reasonable and proportional" to the cost incurred in processing the transaction.
More than 80% of all interchange fees are collected by the 10 largest banks. The amendment offered by Durbin exempts all banks, credit unions and thrifts with assets less than $1 billion, meaning that 92% of all banks, 98% of all credit unions and 86% of all thrifts would be exempt, allowing them to continue to receive the same interchange fees they receive today.
According to the letter signed by 57 national associations and 77 state trade associations, "the amendment would [also] prohibit anti-competitive restrictions on discounts and the setting of minimum transaction levels, providing entities with the freedom to choose their preferred method of payment.... [and] allows businesses to incentivize the use of one card network over another and allows businesses to offer discounts on certain forms of payment."
In the last year, small-business owners have gathered nearly four million petition signatures from their customers and delivered them to members of Congress, calling on them to reform these unfair fees. (Click here for previous CSP Daily News coverage.)
National convenience/petroleum retail organizations signing the letter included the National Association of Convenience Stores (NACS), the National Association of Shell Marketers (NASM), the National Association of Truck Stop Operators (NATSO), Petroleum Marketers Association of America (PMAA) and the Society of Independent Gasoline Marketers of America (SIGMA), as well as most regional and state convenience/petroleum retail groups.
Click the Download Now button below for the full text of the letter and the full list of national, regional and state organizations.
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