The National Restaurant Association says debit swipe fee reforms put in place one year ago have largely benefitted the nation’s small business economy.
“Reforming credit and debit swipe fees has been a top priority for the National Restaurant Association for over a decade,” says Scott DeFife, executive vice president, policy and government affairs for the National Restaurant Association. “Since debit reforms went into effect one year ago, restaurants and their customers have been aided by a more transparent system in which card companies are prevented from arbitrarily increasing debit interchange rates. We know there is more work ahead, specifically on smaller-ticket transactions and credit swipe fee reform, but the important news is that the status quo is changing for the better.”
After years of work by the National Restaurant Association and other merchant groups to sound the alarm on uncontrollable and rising interchange fees for small businesses, Congress passed reforms to give the Federal Reserve the power to determine reasonable fees for debit cards. The Federal Reserve rules went into effect on October 1, 2011.
In its final rule, the Fed capped swipe fees that merchants pay for debit card transactions at 21 cents per transaction – less than the average 44 cents that merchants had previously paid for debit card transactions, but a significant increase over the 12-cent swipe fee cap first proposed by the Fed and based upon historical processing costs.
The National Restaurant Association has joined a lawsuit challenging the final rule, arguing that the Fed did not follow Congressional intent to issue regulations that would ensure debit card swipe fees for merchants are “reasonable and proportional” to the cost of processing debit-card transactions, which is roughly four cents per transaction. Oral arguments are expected to begin October 2.
“While the Federal Reserve’s rule significantly brought down debit swipe fees for many merchants, some restaurant owners have been forced to pay higher fees on smaller-ticket transactions – evidence that the Fed provided card networks like Visa and MasterCard too much latitude to increase rates well above a reasonable and proportional level,” says DeFife.
“Higher fees on small-ticket bills were not the intent of Congress, and the Federal Reserve should reconcile this failure to comply with the law as intended,” DeFife adds. “Furthermore, the card networks’ behavior is evidence that much more transparency and competition is still needed in the payments marketplace.”