Merchants urge Senate to reject bill to delay debit swipe fee

More than 200 state and national organizations representing consumers and merchants urged the Senate to reject S. 4570, the Secure Payments Act, introduced last week. Similar to a bill introduced in the House by Republican Rep. Blaine Luetkemeyer (Missouri) in March, the bill would require the Fed to conduct an in-depth analysis of the proposal’s impact and submit a report to Congress before it can become law.

Essentially, the bill would delay the Federal Reserve’s proposal to reduce the fees that major banks can charge to process debit card transactions.

“Every day the Fed delays in considering its proposed rule means another day that large card-issuing banks will be taking significantly more money from debit transactions than is appropriate, proportionate, or permitted under the law passed by Congress,” the groups said in a letter. “For this reason, financial industry trade associations are trying to keep the Fed from taking action to update its 2011 rule for as long as possible – delaying it will secure the status quo, which is hugely lucrative for them.”

The letter was signed by 218 groups, ranging from consumer advocates to retail associations, and sent to members of the Senate. Signatories included the Merchants Payments Coalition and other national organizations, as well as state groups from every state and Puerto Rico.

The letter noted that the original public comment period on the proposal was extended by 90 days in February at the request of the banking industry.

“There was ample time for all stakeholders to provide information and views to the Fed during the comment period, and the Fed must and will consider those comments,” the letter said. Budd’s bill would require a “second, duplicated review” of the issues already raised in the comment process and “is an obvious attempt to further delay what the Fed has identified as necessary revisions.”

Under the rules issued in 2011, banks with at least $10 billion in assets that adhere to fees set centrally by Visa and Mastercard can charge merchants swipe fees of no more than 21 cents per debit card transaction, plus 1 cent for fraud prevention and 0.05 percent of the transaction amount to replace fraud losses. A Fed proposal released last fall would lower the base rate to 14.4 cents and the amount for fraud losses to 0.04 percent, but increase the amount for fraud prevention to 1.3 cents. Going forward, the rate would automatically adjust every two years based on banks’ costs.

While merchants do not want the proposal to be delayed, MPC said in May that it does not go far enough, as it would cut the amount banks can charge by less than a third, even though banks’ average cost of processing a transaction has fallen by almost 50% – from 7.7 cents before the current rate was set to 3.9 cents from 2021.

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