WASHINGTON--(BUSINESS WIRE)--The Merchants Payments Coalition today said all the evidence shows that five years after passage of the Dodd-Frank financial-reform law, debit-card fees are more competitive and fairer for small merchants and consumers.
Debit swipe fee reform has saved consumers almost $6 billion each year since it went into effect, based on a study by the prominent economist Robert J. Shapiro, and supported 37,500 jobs a year as well.
“Without reform, price-fixing of debit card swipe fees would still be unchecked,” said Mallory Duncan, chairman of the coalition’s massive group of members and senior vice president and general counsel of the National Retail Federation. “Debit reform brought some rationality to a system that made card fees merchants’ fastest-growing expense.”
Five years ago, Congress required the Federal Reserve to limit how much price-fixing card companies can do for their banks. The bipartisan change was championed by Senator Richard Durbin (D-Ill).
Two companies, Visa and MasterCard, dominate the market for debit and credit cards. They secretly fix these “swipe fees” so the banks that issue the cards don’t have to compete for merchants’ business: So the banks all charge the same outrageous fees.
And all of the banks’ claims about potential problems with debit reform have been proved false.
Debit reform only applies to financial institution with $10 billion or more in assets – a handful of credit unions and banks. Smaller institutions are free to charge the old, higher fees.
“The big banks have been feigning concern about small banks and consumers for years to defend their indefensibly high swipe fees,” said Lyle Beckwith, senior vice president, government relations at NACS, the trade association for convenience stores. “But the facts simply don’t support their contentions.”
High swipe fees on debit and credit cards have ballooned into many merchants’ second-highest operating cost after labor.
With tiny profit margins, especially compared to the banks, merchants have to raise prices to cover at least part of the cost of swipe fees. That means everybody, even people who don’t use cards – and especially the poor – pay higher prices for everything from gas to groceries.
That hurts small businesses and weighs down the entire economy, since retailing is such a big chunk of it.
The debit reform measure is a huge improvement.
But after heavy bank lobbying, the Federal Reserve let the banks charge about 25 cents per transaction, more than twice the amount it had originally considered.
That means banks still rack up a juicy profit margin on each transaction – 500 percent – according to the figures the banks themselves report to the Federal Reserve.
That is far higher than in Europe, where the European Union has aggressively promoted competition, and debit- and credit-card swipe fees are much lower than in the U.S.
Merchants are urging the Fed to reconsider its rules and further restrict price-fixing by the card companies.
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.