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US Senate urged to block delay in reducing debit card swipe fees


More than 200 state and national organisations representing consumers and merchants in the US have called on the Senate in a letter to reject legislation that would delay the Federal Reserve’s proposal to reduce the fees big banks can charge to process debit card transactions.

Over 200 organisations in the US urged the Senate to reject delaying the Federal Reserve’s proposal to reduce debit card swipe fees, which have been unchanged for over a decade despite falling bank costs.
A letter signed by 218 groups responded to S 4570, the Secure Payments Act, highlighting the financial burden on merchants and consumers.

Action is necessary because debit card swipe fees have remained unchanged for over a dozen years despite banks’ declining costs, imposing enormous costs upon American merchants and inflating retail prices paid by American consumers, the Merchants Payments Coalition said in a press release.

These comments were made in a letter signed by 218 groups, including consumer advocates and retail trade associations, sent to Senate members. Signatories included the Merchants Payments Coalition and other national organisations, alongside state groups from every state plus Puerto Rico.

The letter responds to S 4570, the Secure Payments Act, introduced last week by Senator Ted Budd, R-NC., with Senators Thom Tillis, R-NC; Steve Daines, R-Mont; Bill Hagerty, R-Tenn; and Katie Britt, R-Ala, as cosponsors. Similar to legislation introduced in the house in March by representative Blaine Luetkemeyer, R-Mo., the bill would require the Fed to conduct an in-depth analysis of the proposal’s impact and issue a report to Congress before it could be enacted.

The letter noted that the original February deadline for public comments on the proposal was delayed by 90 days at the banking industry’s request.

Under regulations established in 2011, banks with at least $10 billion in assets that follow rates centrally set by Visa and Mastercard can charge merchants swipe fees of no more than 21 cents per debit card transaction, plus 1 cent for fraud prevention and 0.05 per cent of the transaction amount for fraud loss recovery. A Fed proposal released last autumn would lower the base amount to 14.4 cents and the amount for fraud loss to 0.04 per cent but would increase the amount for fraud prevention to 1.3 cents. Going forward, the rate would be automatically updated every other year based on banks’ costs.

While merchants do not want the proposal’s implementation delayed, the Merchants Payments Coalition (MPC) said in May that the proposal does not go far enough. It would lower the amount banks can charge by less than a third, even though banks’ average cost of processing a transaction has fallen by nearly 50 per cent—from 7.7 cents before the current rate was set to 3.9 cents as of 2021.

Swipe fee regulations and a provision allowing merchants to choose which networks process debit transactions have saved an estimated $9 billion a year, with studies showing about 70 per cent of the savings shared with consumers, largely by holding down price increases. However, savings could have been higher had the Fed set a lower rate or adjusted rates to follow banks’ falling costs.

According to a Nilson Report, debit card swipe fees cost merchants and their customers $36.3 billion last year. Including credit cards, swipe fees totalled $172 billion in 2023 and have more than doubled over the past decade. These fees are most merchants’ highest operating cost after labour, driving up consumer prices by over $1,100 a year for the average family.

“Every day of further delay in the Fed’s consideration of its proposed rule means another day in which large card-issuing banks are deducting significantly more money out of debit transactions than is reasonable, proportional, or allowable under the law Congress passed,” the groups said. “That is why financial industry trade associations are seeking to delay the Fed as long as possible from taking action to update its 2011 regulation – delay preserves what for them is an enormously lucrative status quo.”

Fibre2Fashion News Desk (DP)



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