New Bill May Delay Swipe Fee Reform

The federal government’s swipe fee reform may be tabled for two years if a Senate bill introduced March 15 passes. This means a potential delay in financial relief for merchants who accept debit cards issued by Visa or MasterCard as a form of payment.

The bipartisan Debit Interchange Fee Study Act ( S. 575) wants the U.S. Treasury to conduct a study to determine how debit interchange regulation will affect consumers and small financial institutions. The act calls for two-year delay on implementing swipe-card fee reform, which includes one year to conduct the study.

If it passes, it would delay the Durbin Amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was set to be finalized next month and take effect in July. This amendment would cap the interchange fee that a merchant’s bank pays a customer’s bank when merchants accept debit cards at 12 cents per transaction.

Though it’s also known as a swipe fee, the interchange fee also affects merchants who do business online and over the phone. Sen. Dick Durbin (D-IL) introduced the bill last May, and said merchants, at that time, were being charged an average of 44 cents per debit-card transaction.

Durbin said in a statement released Tuesday that interchange fees on debit cards charged by Visa and MasterCard on behalf of its bank partners are equal to $1.3 billion per month, and $16.2 billion annually. Half of that amount goes to 10 banks, he said.

The banks and the debit card issuers, naturally, oppose the bill, which is designed to help merchants. Those opponents say swipe-fee reform say that banks would not get a substantial return on investment by charging just 12 cents per debit card transaction.

TCF National Bank last Friday filed an injunction against the Durbin Act, stating it would cut the revenue of banks and credit unions by about $12 billion per year, and result in increased banking fees and costs for consumers.

But NRF senior vice president/general counsel Mallory Duncan said merchants would be able to pass lower swipe fees along to consumers in the form of discounts and other benefits as soon as reform goes into effect in July. This can’t happen if Congress lets bankers stand in the way.

Katherine Lugar, executive vice president/public affairs for the Retail Industry Leaders Association, in a statement urged the senate and congress to stand up for merchants and consumers and vote against the Debit Interchange Fee Study Act.

“The bipartisan swipe-fee reforms signed into law last year will bring fairness and competition to the broken debit market and will save consumers billions by ending decades of price-fixing by Visa and MasterCard,” Lugar said.