In a major victory for retailers, on Wednesday, June 9, the U.S. Senate rejected legislation that would have delayed the implementation of reforms that reduce swipe fees by ensuring that they are “reasonable and proportional” to the actual cost of processing a transaction. The swipe fee reforms were included as part of the Durbin Amendment provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law last July.
Sixty votes in the Senate were needed to delay swipe fee reforms, but opponents of the scheduled implementation fell six votes short.
Under the Dodd-Frank Act, the Federal Reserve is tasked with implementing swipe fee reforms, and in December 2010 it issued a Proposed Rule that would set a maximum allowable amount of $0.12 per debit card transaction, regardless of the final sale amount. The Federal Reserve found that the actual cost to financial institutions to process debit cards averaged $0.04 per transaction, yet for years Visa and MasterCard have been charging Main Street businesses much more in order to attract banks to issue their cards.
However, Senators Jon Tester (D-MT) and Bob Corker (R-TN) introduced legislation that would have delayed implementation of the Durbin Amendment provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act by calling for further study.
“This is a landmark victory for American consumers that will give them the break from skyrocketing swipe fees that they have been seeking for years,” said Matthew Shay, president and CEO of the National Retail Federation. “With the economy still trying to gain momentum and consumers facing skyrocketing costs for necessities like food and fuel, this badly needed reform will help ensure our nation’s economic recovery.”
In May, ABA joined with eight organizations, including the Main Street Alliance and the Northern California Independent Booksellers Association, in asking Majority Leader Harry Reid and Speaker of the House John Boehner to oppose any attempt to delay the swipe fee reform set to take effect in July and also e-mailed members to encourage them to contact their senators and urge them to oppose legislative attempts to delay reform.
Following the Senate vote, the Fed can now issue final rules on July 21 trimming the average 44 cents that banks charge for each debit card transaction, as reported by the Associated Press. The central bank has proposed capping the so-called interchange fee at 12 cents, though the final plan could change slightly.
“The retail industry is the most competitive business environment going today," said Brian Dodge, spokesman for the Retail Industry Leaders Association, as reported by AP. "There is no doubt competition would drive any interchange savings out of the system, which would be reflected by lower prices."