WASHINGTON--()--Some recession-ridden consumers and local governments – already facing severe budget constraints – are paying more for parking thanks to a move by the credit card and banking industry to increase its swipe fees on debit and credit cards used for parking, the Merchants Payments Coalition said today.
“Banks and credit card companies blame debit reform for everything from obesity to bad weather. The bottom line is they will find any way they can to raise fees on consumers and Main Street businesses no matter what Congress or anyone else does”
Instead of acknowledging the parking fee hikes as their own doing, Visa, MasterCard and the nation’s largest banks that issue cards have been falsely blaming the 2011 Durbin Amendment – a provision of the Dodd-Frank banking reform bill that actually reduced debit swipe fees. Banks and credit card companies have been providing inaccurate information about the law, named after its sponsor U.S. Senator Dick Durbin.
“Banks and credit card companies blame debit reform for everything from obesity to bad weather. The bottom line is they will find any way they can to raise fees on consumers and Main Street businesses no matter what Congress or anyone else does,” said Doug Kantor, MPC counsel.
Senator Durbin issued a statement last week, criticizing the credit card industry for increasing the swipe fee on what is known as “small-ticket” items, like parking, in the first place:
“My amendment did not raise these fees, it put a ceiling on them…. The decision whether or not to increase transaction ‘swipe’ fees rests with Visa and MasterCard alone…. Blaming the Durbin Amendment for Visa’s and MasterCard’s decision to raise … fees is like blaming a traffic cop for a driver’s decision to speed and drive recklessly…. (This is) further evidence that more needs to be done to rein in the credit card giants’ unfair swipe fee system.”
The Durbin Amendment sought to bring competition and transparency back into the credit card market, directing the Federal Reserve to price the debit swipe fee at a “reasonable and proportional” amount compared to cost. The Fed first proposed reducing the fee to between 7 and 12 cents, but the banking lobby convinced the regulatory agency to double or triple that amount. Visa and MasterCard quickly exploited the Fed’s decision, increasing fees on even small-ticket items that had been much lower. Credit card swipe fees for all transactions also have jumped, as they have every year for more than a decade no matter what Congress does or does not do. In 2011, a group of merchants filed a lawsuit challenging the Fed’s actions, arguing that the Fed did not follow the law under the Durbin Amendment.
Swipe fees reflect the transaction costs when consumers use or swipe their cards. The Fed has calculated that cost at 4 cents a swipe; however, the credit card industry, including the banks that issue the cards, had been charging on average 44 cents a swipe for debit cards until debit reform reduced it for the biggest banks to about 24 cents. In addition to the debit card fees, merchants pay 2 to 3 percent on the amount charged on a credit card. For example, on a $100 purchase, merchants pay $2-$3 in swipe fees – a cost calculated into consumer prices.
Rising faster than health care costs, swipe fees have more than tripled since 2004. Visa and MasterCard control 80% of the credit card market and set the fees in secret. The fees are the second highest expense for merchants, generating around $50 billion a year in revenue for banks. That equates into a $462 annual “tax” on every U.S. household levied by a credit card industry that operates in a non-competitive environment without any transparency.
Reports of local governments across the country increasing parking fees as a result of the credit card industry’s actions have increased. The city of Austin recently announced a parking fee hike and last week, the parking management company for the District of Columbia, Parkmobile USA, sent emails to all of its customers, specifically blaming the Durbin Amendment for an increase in the transaction fee from 32 cents to 45 cents.
While Parkmobile initially blamed the Durbin Amendment, it retreated and changed its explanation when a customer complained. In an email obtained by the MPC, Parkmobile wrote to a customer:
“The card brands and large issuing banks weren't too happy about having their debit interchange fees capped. So, they responded by raising regulated debit interchange fees to the cap across the board without regard to transaction size. The result is that businesses with a small average ticket no longer get special treatment on regulated debit transactions. This is especially damaging since debit cards are used far more frequently than credit cards to pay for small transactions. In Parkmobile’s case, payment processing costs have tripled because of these changes.”
It’s unclear whether Parkmobile has sent emails to customers in other cities, but the company is one of the largest parking management companies in the world and represents around 100 cities in the United States.
The Merchants Payments Coalition - UnfairCreditCardFees.com - 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.