Retailers and consumers are a step closer to witnessing credit card swipe fee reform now that the U.S. House of Representatives has passed the Restoring American Financial Stability Act of 2010. The House passed the sweeping financial services reform bill June 30 with a 237-192 vote.
The bill includes provisions known as the Durbin Amendment that would provide credit card fee relief to retailers and consumers while promoting increased competition within the credit card industry. The Senate will vote on the bill sometime after it returns from recess next week.
“This historic reform would not have been possible without the tremendous effort of our members who called on their senators and representatives and asked them to support this common-sense, consumer-friendly amendment,” said Hank Armour, president and CEO of the National Association of Convenience Stores (NACS). “These calls, along with the millions of consumer signatures convenience retailers collected and delivered to Congress urging credit and debit card fee reform, clearly shows that members of Congress are listening to their constituents.”
Credit and debit card swipe fees, also known as interchange fees, are a percentage of each transaction that Visa and MasterCard and their member banks collect from retailers every time a credit or debit card is used. These fees average about 2 percent in the United States and cost American consumers more than $48 billion in 2008, according to NACS.
Swipe fees are the second largest expense item for convenience and petroleum retailers, trailing only labor costs. According to NACS figures, credit card fees increased last year from 1.35 percent to 1.45 percent of total industry sales dollars, factoring in all forms of payment, including cash and check. Total credit card fees ($7.4 billion) also surpassed overall convenience store industry pretax profits ($4.8 billion) for the fourth consecutive year.
The Durbin Amendment would direct the Federal Reserve to issue rules to ensure that debit card swipe fees are reasonable and proportional to the processing costs incurred. The amendment also would prevent card networks from requiring their debit cards be used on one debit card network, thus ensuring retailers a choice of at least two networks to run debit transactions.
The amendment also would allow sellers to decline the use of credit cards for small dollar purchases because swipe fees often exceed profits on such sales, NACS officials said. In addition, retailers would be able to offer discounts to consumers who choose to pay with cash, check or debit card.
The amendment also provides exemptions for small banks and credit unions. Banks with less than $10 billion in assets would not be affected by the legislation. Included in this exemption would be 99 percent of banks (all but 86), 99 percent of credit unions (all but three) and 97 percent of thrifts (all but 11), according to a NACS press release.
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