In 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which contained a provision that would require that debit card swipe fees be “reasonable and proportional” to the actual cost to process the transaction. However, some in Congress are looking to delay implementation of swipe fee reform by as many as two years.
This week, the American Booksellers Association joined with eight organizations, including the Main Street Alliance and the Northern California Independent Booksellers Association, in asking the Congressional leadership to oppose any attempt to delay the swipe fee reform set to take effect in July.
In a letter dated May 17 to Senate Majority Leader Harry Reid and Speaker of the House John Boehner, the groups urged against “any delay in the implementation of the Durbin Amendment provisions on debit card interchange fees contained in the Wall Street Reform and Consumer Protection Act.” ABA members should also be on the lookout for an e-mail on Friday asking them to contact their senators to urge them to oppose any measure that would delay implementation of swipe fee reform.
In the letter to the Congressional leadership, the groups wrote: “The reforms to debit card fees are law. They were approved by Congress and are scheduled to go into effect. This reform will put billions back in consumers’ pockets each year and add thousands of jobs each year. Businesses in this country pay the highest swipe fees in the world, and we have been waiting for years to see these reforms. Every month of delay means another $1 billion being handed to large banks from our merchants and their customers. Believe us when we say that American small businesses would do better with the $1.3 billion per month they now pay in debit card swipe fees by generating more economic activity, creating more jobs, and passing on more savings to the consumer.”
In December 2010, the Federal Reserve, which is tasked with implementing these reforms, issued a Proposed Rule that would set a maximum allowable amount of $0.12 per debit card transaction, regardless of the final sale amount. The Federal Reserve found that the actual cost to financial institutions to process debit cards averaged $0.04 per transaction, yet for years Visa and MasterCard have been charging Main Street businesses much more in order to attract banks to issue their cards, according to a fact sheet released by the Retail Industry Leaders Association.
Under the requirements of the Dodd-Frank Act, the Federal Reserve was expected to issue final rules prior to April 21, 2011. However, on March 29, 2011, Federal Reserve Chairman Ben Bernanke advised lawmakers that the Board would be unable to meet the April 21 deadline, but that it was committed to meeting the Act’s directive that it issue final rules regarding network exclusivity and routing by July 21.
With the Federal Reserve now delaying on issuing final rules, many banks have found allies in Congress to introduce legislation further delaying implementation of these reforms as they contend there is a need to study the issue further.
In Congress, legislation has been introduced in both the U.S. House of Representatives and the Senate to delay implementation of the Durbin Amendment by one or two years, respectively. In the House, Representatives Shelley Moore Capito (R-WV) and Debbie Wasserman Schultz (D-FL) introduced the Consumers Payment System Protection Act (H.R. 1081). The bill would delay implementation of the effective dates in the Durbin Amendment by one year and directs the Federal Reserve to make revisions to any proposed or final rule while requiring a study before the reforms can go into effect.
In the Senate, Senators Jon Tester (D-MT) and Bob Corker (R-TN) introduced the Debit Interchange Fee Study Act of 2011 (S. 575), which would delay implementation of the effective dates in the Durbin Amendment by two years. The bill also would direct the Federal Reserve to withdraw the proposed regulations and conduct a study.