As Debit-card Swipe-fee Reform Takes Effect, National Restaurant Association Issues Challenge To Card Companies: Be Part Of The Solution

As many restaurant operators look forward to the implementation of debit-card swipe-fee reform, effective October 1, the National Restaurant Association today issued a challenge to card companies who have threatened higher fees on small-ticket purchases: be part of the solution of reform.



"Debit-card swipe-fee reform ensures that card companies cannot continue to arbitrarily increase debit interchange rates, among other positive changes to the status quo, such as allowing businesses to set a $10 minimum for credit-card payments and offer discounts to customers who pay in cash," said Scott DeFife, Executive Vice President of Policy and Government Affairs for the National Restaurant Association. "While this is good news for many restaurant operators and consumers, not all sectors of the restaurant industry will see the savings they, and their customers, deserve under the law if card companies act on their threats of higher fees on small-ticket bills."



After years of complaints from the National Restaurant Association and other merchant groups about uncontrollable and rising interchange fees for their members, Congress passed reforms under what is known as the Durbin Amendment to give the Federal Reserve the power to regulate interchange fees for debit cards.



The Durbin Amendment was included in the Dodd-Frank financial services reform bill Congress passed in 2010. Named for its top champion in Congress, Sen. Dick Durbin (D-Ill.), the amendment charged the Federal Reserve with ensuring that debit-card fees are "reasonable and proportional" to the cost of processing transactions.



In June 2011, the Federal Reserve moved to cap swipe fees that merchants pay for debit-card transactions at 21 cents per transaction - less than the average 44 cents that merchants pay for debit-card transactions today, but a significant increase over the 12-cent swipe-fee cap that the Federal Reserve first proposed in December.



Following the Federal Reserve's final action, card companies have threatened higher fees on small-ticket purchases. According to a recent Bloomberg News report, "MasterCard will impose the highest fees allowed on all debit transactions, including so-called small-ticket purchases, for cards issued by the biggest U.S. banks ... Visa will do the same ..."



"The Federal Reserve acknowledged that card companies' practices have resulted in a broken market," DeFife added. "Economic data uncovered during the interchange debate pegged the average debit transaction processing costs at only four cents per transaction. In fact, as the legislative battle over the Tester-Corker amendment to undo the interchange reforms reached its final hours, Visa sent a letter to Senators offering to 'make a reduction of debit interchange to help small businesses, i.e., those with $10 million or less in total sales...' if the Tester-Corker amendment passed. Visa offered to 'lower by 35% the debit interchange rates applicable to transactions at small merchants.'



"Now is the perfect time for new entrants into the debit card market to take advantage of the new rules and come in with a product that charges merchants and consumers a reasonable and appropriate rate to the cost of the transaction. We urge card companies to stand with consumers and be part of the solution of reform efforts."