Broad Coalition Urges House to Support Regulation of Swipe Fees

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This week, more than 200 national and state organizations representing a diverse array of small businesses joined together to urge the U.S. House of Representatives to support an amendment to regulate swipe fees charged by banks for debit-card transactions in HR 4173. The groups included the American Booksellers Association, the Retail Council of New York, and the Retail Industry Leaders Association.

In mid-May, the swipe-fee provision (Section 1079), introduced by Sen. Richard Durbin (D-IL), was added to the Senate version of the Wall Street Reform and Consumer Protection Act (HR 4173) and was adopted in the bill by a vote of 64 - 33. ABA is strongly encouraging its members to contact their representatives to urge them to support the swipe-fee reforms in HR 4173 as the bill proceeds through conference.

Durbin's amendment would give the Federal Reserve the authority to develop regulations that would ensure that swipe fees imposed on debit card transactions are proportional to the cost incurred in processing the transaction. The provision also allows businesses to offer certain discounts to incentivize the use of one card network over another or for certain forms of payment. However, the provision would maintain the "honor all cards" requirements for businesses, and it would not allow retailers to discriminate against debit cards issued by small banks and credit unions.

In the letter, the groups stress that Durbin's amendment to the financial reform bill "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." The groups contend that, "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 charities -- all of whom pay swipe fees -- are struggling to help the economy grow again and when consumers can least afford pricing increases."

The letter notes that while Visa Europe has announced that it is voluntarily dropping debit card swipe fees to 0.2 percent in Europe, at the same time it has increased rates on similar transactions in the U.S. by some 30 percent. In 2009, $1.21 trillion in purchases were paid with debit cards processed via the Visa and MasterCard networks, generating $19.7 billion in fees paid by merchants, as reported by the A.P.

"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," the groups noted. "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."

ABA is urging its members to call their representatives and ask them to support the swipe fee reforms in Section 1079 of HR 4173 as it proceeds through conference. Booksellers with questions can contact ABA Senior Public Policy Analyst David Grogan at (800) 637-0037, ext. 6662, or [email protected].