"Congress has an historic opportunity to help small businesses, retailers, restaurants and all of our members by reforming swipe fees. Unfortunately, these fees have become excessive and have increased 300 percent over the last decade. Our legislative branch can give businesses and retailers across the country a huge boost by making debit card swipe fees 'reasonable and proportional' to the cost of processing each transaction.
"The banking and credit card lobbyists are fighting hard to strip the provision out during the Senate-House conference committee, which is expected to convene later this week. I urge Congress to stand strong against Visa and MasterCard, and protect swipe fee reform," said Lyle Beckwith, Senior Vice President of the National Association of Convenience Stores.
The Merchants Payments Coalition is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line 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. For more information about credit card swipe fees, please visit http://www.UnfairCreditCardFees.com.
To the Members of the House of Representatives
On behalf of the 215 undersigned state and national organizations, representing a diverse array of small businesses, retailers, restaurants, grocery stores, convenience stores and others, we write to urge you to retain section 1079 in the Senate's amendments to the Wall Street Reform& Consumer Protection Act (H.R. 4173). This section, offered as an amendment (S. AMDT. 3989) by Senator Richard Durbin (D-Ill.), was adopted on a bipartisan vote of 64 to 33 in the Senate and provides common-sense reforms to debit card interchange "swipe" fees while also addressing anti-competitive rules forced on businesses that accept credit and debit cards.
Unless relief is granted, swipe fees, which amounted to $48 billion in 2008, will continue their long history of sharp increases as card companies and issuing banks seek even higher profits. This comes at a time when businesses, state agencies and charitiesall of whom pay swipe feesare struggling to help the economy grow again and when consumers can least afford pricing increases.
Despite Congress' recent efforts to reign in abusive practices, the credit card companies' actions continue to be particularly egregious, raising swipe fee rates while struggling industries grapple with the strains of the recession. For example, Visa Europe announced in April that it was voluntarily dropping debit card swipe fees to 0.2% in Europea 60% decreasewhile at the same time Visa increased rates on similar transactions in the United States by some 30%. With U.S. debit card swipe fees now approaching 2%, why are American businesses paying a rate that is nearly 10 times higher than Visa offers Europeans?
Simple, common-sense reforms are needed to correct this market imbalance and give our organizations' members at least a chance to manage swipe fee costs. First, section 1079 would give the Federal Reserve the authority to develop regulations, openly and fairly, that would ensure that swipe fees imposed on debit card transactions are "reasonable and proportional" to the cost incurred in processing the transaction. While debit transactions are not an extension of credit and are drawn directly from a consumer's checking account, the related swipe fees have continued to increase. Consequently, it is now 43 times more expensive for a small business to process a $100 debit card transaction than a traditional paper check, a result that makes little sense in today's digital age.
To avoid affecting small banks, credit unions and thrifts, the Federal Reserve's authority would not apply to debit card issuers with assets of under $10 billion. Therefore, 99 percent of all banks, 99 percent of all credit unions, and 97 percent of all thrifts would be exempt and would continue to receive the same swipe fees they receive today.
Second, the amendment would prohibit anti-competitive restrictions on discounts and minimum transaction levels. Under current rules, any business, charity or government agency that accepts credit or debit cards is prohibited from setting a minimum transaction levelfor example, a $3 minimumeven though the business may actually lose money on the sale because of slim profit margins. Visa and MasterCard can and do impose fines on small businessesup to $5,000 per dayfor such offenses, ensuring that the card companies and big banks turn a profit, even if the small business loses money on the transaction.
The amendment also allows businesses to offer certain discounts to incentivize the use of one card network over another (e.g., a discount may be provided for Discover cards if they carry a lower swipe fee) or for certain forms of payment (e.g., a discount may be offered for cash, check, or PIN debit, all of which carry lower rates than credit cards). However, this provision would not enable merchants to discriminate against debit cards issued by small banks and credit unions. Visa and MasterCard require merchants to accept all cards within their networks (the so-called "honor all cards" rule), a contractual requirement that this amendment does not change.
By enacting these important reforms, Congress will send a strong message that it supports modernizing and updating our financial payments systems while providing relief to businesses faced with skyrocketing swipe feeswhich for many exceed the cost of health care for their employees. Failure to address swipe fees will have significant adverse effects on our industries as the card companies and big banks continue to seek higher profits through ever increasing swipe fees to make up for their failing portfolios and other losses.
In closing, the swipe fee reforms in the Senate amendment strike a reasonable balance by excluding virtually every community bank, credit union, and thrift, which we understand are vital to our local communities and businesses across the nation. As a result, support for the amendment, which passed the Senate with a strong bipartisan majority and garnering more votes than the underlying bill, demonstrated a strong vote for Main Street businesses instead of Wall Street banks. We ask that you support retaining section 1079the Durbin swipe fee amendmentwithout change as the bill proceeds through conference in order to ensure that financial regulatory reform is comprehensive and complete. We look forward to working with you and your staff to incorporate these meaningful, common-sense reforms as part of the final legislation.
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