Reduced fees for debit card transactions go into effect on Monday and the architect of the authorizing legislation, Senator Dick Durbin from Illinois, was feeling a lot of love from a retail industry that's convinced ample justification remains for even deeper fee reductions.
Retail trade groups applauded Durbin and other lawmakers for legislation that reduced to 24 cents, roughly half the prior fee, the amount charged per debit card transaction. Retail Industry Leaders Association president Sandy Kennedy called the swipe-fee reform a major step toward fairness and relief of a broken system. At the Food Marketing Institute, president and CEO Leslie Sarasin, said the reduction brings fairness and transparency to fees that were among the fastest growing costs for supermarkets and absent any regulation would have increased unchecked. Meanwhile, National Retail Federation SVP Mallory Duncan suggested the fee reduction would allow retailers to pass the savings on to customers.
“Change won’t come overnight, but consumers will definitely benefit,” Duncan said. “Reducing these fees will put billions of dollars back into the Main Street economy, helping American families stretch their paychecks and ultimately preserving and creating local jobs to keep America on the road to recovery.”
That might be overstating things a bit, but swipe fees do cost the retail industry $20 billion annually and the recent reduction is expected to result in a $7 billion savings. That’s a big number, but retail trade groups contend it should have been bigger and point out that Durbin’s legislation was weakened by Federal Reserve implementation regulations that didn’t cut the fee as sharply as originally planned which suggests an ongoing battle looms.
According to RILA, the reforms are worthy of celebration, but it doesn’t change the fact that many issues remain and because of a deeply flawed Federal Reserve implementation rule. In July the Federal Reserve capped fees at 24 cents, nearly double what it had proposed seven months before and six times higher than what its own data showed as the actual cost to process a transaction, according to RILA. Recently Visa and MasterCard began alerting card issuing banks that it would treat the Federal Reserve cap as a minimum as well, guaranteeing fee hikes for merchants, such as convenience stores and coffee shops, who process sma