By: John Lofstock, Editor.
After a years-long struggle to get some much-needed relief from the high interchange fees that are eroding the industry’s profitability, convenience store operators are in danger of seeing the victory slip between their hands.
The Durbin amendment to the Dodd-Frank Consumer Financial Protection Act, which is set to be finalized April 21 and take effect in July, would cap the interchange fee on debit cards at 12 cents per transaction. If signed into law at 12 cents, the rules would still allow banks to make a reasonable, if not sizable, profit on debit transactions.
Last month, however, two bills in Congress (S. 575 sponsored by Sen. John Tester (D-Mont. and H.R. 1081 sponsored by Rep. Shelley Moore Capito (R-W.Va.) aim to delay the implementation of Durbin, which would be a significant blow to merchants across the country.
Tester’s Debit Interchange Fee Study Act 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 a two-year delay on implementing swipe-card fee reform, which includes one year to conduct the study.
At an advocacy briefing in Washington organized by NACS for the industry trade press, Rep. Peter Welch (D-Vt.) said the Tester bill, “Calls for delay, but seeks to derail. This is Washington speak for killing legislation.”
What is so outrageous about delaying the Durbin amendment is that the Federal Reserve did not seek to eliminate debit swipe fees, but to define a rate that was “fair and equitable.” A survey of banks by the Fed found that debit swipe costs averaged around four cents per transaction, providing the banks with a profit margin of 300% on every debit transaction in the U.S.
Imagine the fury if petroleum marketers tried that with gasoline?
It is absolutely essential that convenience store retailers continue the fight until the battle is won by making their voices heard in Washington. NACS and a number of other organizations have organized rallies on Capitol Hill over the past several weeks, but nothing is as effective as contacting your Congressional representatives and letting them know how interchange fees are hurting your business. Whether it’s in person, by telephone or by email, retailers have to sound the alarm or they will face the consequences.
“After eight years of work we could lose this,” said Lyle Beckwith, senior vice president of government relations for NACS, even though big banks and credit unions don’t have a strong argument. “Everything they say is based on a hypothetical. Everything we talk about is factual.”
But that is hardly enough to slow the banking industry. The banking lobby is strong and it’s armed with a war chest of special interest money that it’s not afraid to toss around. Banking executives and lobbyists stormed Washington last month to rally support for Tester’s proposal spending and estimated $9 million on, among other things, an aggressive marketing campaign seemingly designed to scare consumers.
In well-placed ads on the Washington subway banks threatened to eliminate free checking and raise fees in other areas to recoup revenue lost as a result of Durbin.
This is the equivalent of a convenience store chain running ads saying it would start overcharging customers for sandwiches and packaged beverages to make up for sales lost due to higher tobacco taxes. Customers would never stand for it and would take their business over to a competitor with fair prices.
Sanctimonious bankers seeking to gouge customers with excessive fees can expect a similar result.