Late last week, trade associations and Main Street businesses of all sizes, led by the Retail Industry Leaders Association (RILA), wrote to the Federal Reserve in support of swipe fee reform. More than 1,500 companies and associations signed the letter, including the American Booksellers Association, the National Association of College Stores, and the National Retail Federation.
Swipe fee reforms, which are included in the Dodd-Frank Wall Street Reform and Consumer Protection Act, will limit debit card swipe fees to the transactional costs, and the reforms will prohibit banks from subsidizing junk mailings and executive bonuses with the fees. The legislation applies only to banks with more than $10 billion in assets, which exempts all but roughly 100 financial institutions from the swipe fee provisions. Visa has already announced that it plans to introduce a two-tier interchange system in order to process small and community banks at their unregulated interchange rate.
The groups worry that opponents of the interchange fee reforms included in the Dodd-Frank Act are working to undo the statute before the Federal Reserve’s rules take effect later this summer. With a hearing likely to be scheduled in the House Financial Services Subcommittee on Financial Institutions in mid-February, the groups wrote to the Federal Reserve in an effort to show their support for the fee reforms to make sure they are not rolled back or weakened.
“The big banks have embarked on a multi-million dollar misinformation campaign to make sure that this Main Street stimulus is postponed and abandoned,” said Jennifer Hatcher, vice president of government relations at the Food Marketing Institute, in a statement. “The American business community isn’t content to sit on the sidelines and watch the banking and credit card giants continue to injure retailers, consumers, and our economy as a whole with their anti-competitive behavior. We’re making our voices heard and fighting to ensure that swipe fee reforms are implemented this summer, as directed by the law."
In the letter, the groups said: "The current system of unchecked central price-fixing by the card companies has led to an inefficient market with complex and unpredictable rates, and we look forward to the implementation of the debit interchange fee and routing reforms this summer that will provide much-needed relief to Main Street businesses and our customers. We understand that some of the big banks that benefit from these excessive fees want to delay your work and are willing to take extreme measures to attempt to do so. If they are successful, it will simply allow them to further injure retailers, consumers, and our economy as a whole with their anti-competitive behavior. We urge you to move forward to implement these reforms and continue to move toward the beneficial model set by the check system."
Analysts have said that swipe fee reforms will, in fact, benefit small and community banks that are not regulated by the law and will give them an opportunity to gain a larger market share.