Jun 15, 2016

NRF criticizes Neugebauer effort to double swipe fees paid by retailers, consumers

The National Retail Federation today released the following statement after Rep. Randy Neugebauer, (R-Texas), introduced legislation that would repeal the Durbin amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  

“On his way out the door, Congressman Neugebauer introduced legislation to double the swipe fees banks extract from businesses and their customers,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Increasing these fees will undermine Main Street businesses, keep them from hiring and expanding, and slow the entire economy. Rep. Neugebauer wants to give the banks one last gift before retiring from Congress, but he is on the wrong side of this issue and the American people.”

Swipe fees on debit and credit cards are many retailers’ second-largest operating cost, behind labor. Exorbitant swipe fees also mean consumers pay higher prices. American merchants and consumers still pay the highest swipe fees in the world on debit and credit cards, according to the Federal Reserve Bank of Kansas City.

Under Dodd-Frank, the Federal Reserve was required to adopt regulations that would result in debit swipe fees that were “reasonable and proportional” to the actual cost of processing a transaction and inject competition into debit routing. Competition in routing allows for transactions to be processed faster, more securely and, in some instances, less expensively. Federal Reserve staff calculated the average cost at 4 cents per transaction and proposed a cap no higher than 12 cents. Nonetheless, after heavy lobbying from banks, the Federal Reserve Board of Governors eventually settled on 21 cents plus 0.05 percent of the transaction for fraud recovery and allowed another 1 cent for fraud prevention in most cases. The cap, which applies only to financial institutions with $10 billion or more in assets, took effect in 2011 and totals about 24 cents on a typical debit card transaction.