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The National Restaurant Association (NRA) expressed strong concern and disappointment following the Federal Reserve’s vote today to cap the “swipe fees” that merchants pay for debit-card transactions at 21 cents per transaction—less than the average 44 cents that merchants pay for debit-card transactions today, but a significant increase over the 12-cent swipe-fee cap that the Federal Reserve proposed in December.
The regulation, which will take effect October 1, subverts Congress’s intent to make debit-card fees “reasonable and proportional” to the cost of processing debit charges, the Association says.
“The Federal Reserve appears to have caved to lobbying by the big banks and debit-card companies and ignored the spirit of last year’s Durbin Amendment, which was aimed at fixing a broken U.S. debit-fee market and bringing fairness to merchants and consumers who have no control over rising swipe fees,” says Scott DeFife, executive vice president of policy and government affairs for the NRA.
The NRA is a leading member of the Merchants Payments Coalition, a group representing millions of card-accepting merchants.
By capping fees, the regulation will provide many restaurants with some financial relief from one of the fastest-rising and uncontrollable costs involved in running a restaurant business. However, the relief is not nearly as significant as the NRA and its allies in the merchant community had hoped, and for some segments of the industry, there may be little if any immediate savings.
“We are disappointed that the final fee cap rose as much as it did from the Fed’s proposed rule,” DeFife says. “While the Fed’s rule acknowledges that the card companies’ practices have resulted in a broken market, and while the new cap will ensure that card companies cannot continue to arbitrarily increase debit interchange rates, this rule will not provide businesses and consumers with the savings they deserve under the law.”
After years of complaints from the NRA and other merchant groups about uncontrollable and rising interchange fees for their members, Congress passed the Durbin Amendment in 2010 to give the Federal Reserve the power to regulate interchange fees for debit cards.
The Durbin Amendment was included in the Dodd-Frank financial services reform bill Congress passed last year. The December action from the Federal Reserve resulted in months of intense lobbying by banking interests to overturn the Fed’s proposal.
The Durbin Amendment—named for its top champion in Congress, Sen. Dick Durbin (D-Ill.)—charged the Federal Reserve with ensuring that debit-card fees are “reasonable and proportional” to the cost of processing transactions.
“We are grateful to Senator Durbin for his leadership throughout this two-year process to change the status quo of a broken debit-fee market,” DeFife says. “We obviously must continue to work to educate policymakers on the stranglehold that the card companies have on the American consumer.”
The Durbin Amendment also allowed businesses to set a $10 minimum for credit-card payments and offer discounts to customers who pay in cash. These benefits have been in effect since last summer.