WASHINGTON — Retailers converged on Capitol Hill Wednesday to pressure lawmakers to support maintaining a provision in the sweeping Dodd-Frank financial regulatory reform legislation that sets caps on debit swipe fees as Congress tees up legislation aimed at repealing it.
A group of 60 retail executives pounded the pavement to get their message out that they will oppose any attempt by lawmakers to repeal what is known as the Durbin amendment, a provision that directed the Federal Reserve Board to set a cap on debit swipe fees.
Congress passed legislation in 2010 known as the Dodd-Frank Consumer Protection Act that set sweeping financial regulations and also directed the Fed to adopt new rules governing debit card fees, which are the fees that banks charge retailers when customers use the cards.
The legislation directed the Fed to set debit fees that were “reasonable and proportional” to the actual cost of processing a transaction. The Fed determined that the average incremental processing cost was 4 cents a transaction and initially set the cap on fees a bank could charge a retailer at a maximum of 12 cents a transaction. But in its final regulation issued in October 2011, the Fed increased the limit and set the cap at 21 cents a transaction.
Retail officials said lawmakers are now preparing to reintroduce legislation that would “rip away” the reforms on debit swipe fees and raise costs for Main Street merchants.
President Trump has pledged to “cut a lot” out of the Dodd-Frank legislation, as well, although he has not weighed in on the Durbin amendment and swipe-fee cap specifically.
“We expect to be cutting a lot out of Dodd-Frank because frankly I have so many people, friends of mine, that have nice businesses and they can’t borrow money,” Trump said last week. “They just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank. So we’ll be talking about that in terms of the banking industry.”
He later signed an executive order directing the Treasury Department to conduct a review of all financial regulations, which will include the Dodd-Frank law.
Retailers are most concerned about preserving the swipe-fee component of Dodd-Frank.
“By repealing debit swipe-fee reform, Congress is standing with card companies and big banks on the backs of Main Street retailers. These reforms have saved retailers and our consumers billions. Repealing these reforms would harm merchants and our customers. The electorate has spoken and they do not want to bail out big banks for providing another bonus check for Wall Street,” said Austen Jensen, vice president of financial services for the Retail Industry Leaders Association.
A RILA spokeswoman said blocking the expected attempt by lawmakers to repeal the Durbin amendment and a separate legislative push to impose a border adjustability tax on imports are the association’s two “biggest issues” at the moment.
“If debit reform is repealed, the card industry will go back to anticompetitive practices that cost retailers and their customers billions of dollars a year,” said Mallory Duncan, National Retail Federation senior vice president and general counsel. “If that happens, the fees will go nowhere but up and the opportunity for competition will be lost. Retailers are on Capitol Hill today to tell lawmakers that debit reform needs to be preserved for the sake of American consumers and our nation’s economy.”
Rep. Jeb Hensarling (R., Tex.) is expected to reintroduce a bill dubbed the Financial CHOICE Act in the House in the coming days. The bill he authored and introduced last year contained a provision that would repeal the Durbin amendment and lift the cap on the fees that banks and card companies can charge retailers.
Industry officials believe the bill being reintroduced soon will contain the same provision and are fighting hard to have it removed in an effort to keep the cap in place.
Retailers have not always been supportive of the cap that was set by the Fed, however, and have long battled to have it lowered. A long protracted legal battle made its way to the Supreme Court in August 2014.
The NRF, Boscov’s Department Store and four other plaintiffs petitioned the High Court to review a ruling by an appeals court, which let stand the Fed’s cap of 21 cents on debit-card transactions.
At the time, retailers said they paid an estimated $20 billion on debit-fee transactions annually. The average fee they paid before the cap, however, was about 45 cents per debit transaction.
An NRF study found that retailers would save $8.5 billion with a 21-cent cap, but could reap $12.5 billion in savings if the limit on fees per debit card transactions were set much lower.
But the Supreme Court ultimately declined to hear the challenge by the retailers and the 21-cent cap remained in place.
“We were happy to see a cap, but disappointed it was set so high [at the time], which was roughly double [the cap] the Fed’s staff proposed,” an NRF spokesman said. “While it has brought significant relief to the debit market, it didn’t bring nearly as much as it could or should have been. While we would prefer to see it lowered, we don’t want to see it go away.”