Fight Over Debit Cards Heats Up Again
The U.S. Senate voted to reform debit-card swipe fees in July, but the battle on how to enforce this rule is getting more intense, said Ed Mierzwinski, a supporter of swipe-fee reform.
“A massive lobbying effort is being made by banks and credit unions to roll back (swipe-fee reform), said Mierzwinski, director, consumer program, for U.S. Public Interest Group, based in Washington, D.C.
Swipe fees are the estimated $48 billion that merchants pay to banks and credit-card companies for the use of those ubiquitous terminals in every shop from convenience stores to luxury retail emporiums.
The Durbin Interchange Amendment was part of the financial-overhaul bill that passed the Senate in July on a 60–39 vote. The amendment requires the Federal Reserve to judge how much debit-card interchange fees should be cut. Currently, interchange fees range from 1 percent to 2 percent of the total bill whenever a debit card is used.
How this rule is implemented is crucial for banks and retailers. According to a 2010 Federal Reserve payment study, debit-card use represents 35 percent of total noncash payments and is the most popular form of noncash payment.
A proposal from the Federal Reserve suggested a 12-cent ceiling for debit interchange fees, an amount much less than the average 44 percent per debit-card swipe collected in 2009. Interchange fees for debit-card transactions could be more than 70 percent lower than the 2009 average, according to a Federal Reserve statement, and banks and credit cards could stand to lose billions of dollars.
In December, the Federal Reserve requested public comment on how to enforce these fees. The Fed will gather comments until Feb. 22. The debit-card reform law takes effect on July 11.—Andrew Asch