NEW YORK (MainStreet) — In 2010, Congress made it a priority to put “swipe fee” language into the Financial Reform Act, but the card industry's lobbying efforts to delay such reform could cost retailers up to $1 billion per month.
Swipe fees, also known as bank interchange fees, are the costs retailers incur by accepting debit cards from customers. Big card companies like MasterCard (Stock Quote: MA) and Visa (Stock Quote: V) and the banks that offer the cards collect those swipe fees from retailers on every debit card transaction. The fees average about 2% of the total cost of the transaction, according to the National Association of Convenience Stores.
The Federal Reserve's proposal in December would cap debit card swipe fees at no more than 12 cents per transaction.
The language on swipe fees was originally inserted into the Dodd-Frank financial reform bill that passed last June. The so-called “Durbin Amendment” directed the Federal Reserve to make sure debit card swipe fees were reasonable and proportional to the operating costs incurred by financial services companies. The bill was aimed at large banks only – financial institutions with under $10 billion in assets were exempt.
“Congress recognized last year that the credit card companies and big banks have been extracting monopoly-like fees from merchants and their customers for far too long,” says Mallory Duncan, general counsel for the National Retail Federation. “Now that reform is about to go into effect, the card industry is asking for a do-over they don’t deserve. Every month they can push back reform is another billion dollars taken out of consumers’ pockets. We would rather use that savings to cut prices, provide more retail workers with health insurance or put more Americans to work.”