Is swipe fee reform dead?


Last summer, Republicans took aim at financial reform by proposing legislative action to replace Dodd-Frank with the Financial Choice Act. The proposal included a repeal of the hard-won debit-card swipe fees reform that more fairly set what’s paid by retailers. Should we expect it to happen this year?

It’s been five years since the implementation of debit swipe fee reform following hard-fought legislative battles on Capitol Hill and a variety of court clashes. Under the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010, the Federal Reserve was mandated to adopt regulations that would result in debit swipe fees that were "reasonable and proportional" to the actual cost of processing a transaction.

A year later, the Federal Reserve finally approved rules required by Dodd-Frank that resulted in a 21-cent base fee, down from 40-cents-plus charged retailers by card companies and banks.

Fast forward to June 2016, when Rep. Jeb Hensarling (R-Texas) released a draft of the Financial Choice Act. Hensarling is chairman of the House Financial Services Committee.
“Choice” was an acronym for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.”

Groups like the Retail Industry Leaders Association and the National Retail Federation immediately blasted Hensarling's proposed legislation. It’s a "return to the bad old days when card companies and banks freely picked the public's pocket," National Retail Federation senior VP and general counsel Mallory Duncan said.

Retail Industry Leaders Association vice president of government affairs Austen Jensen put it this way: “It is disappointing to see the Choice Act favors the largest banks and card networks in the nation over Main Street. Giving banks and card networks a green light to raise fees on businesses and consumers again is not the kind of reform the American people want.”

In essence, if the cap is repealed, the fees banks charge retailers and their customers when they use a debit card to pay for purchases will likely double. Debit swipe fee reform also introduced some measure of competition into the debit card market, though it continues to be largely controlled by the Visa-MasterCard duopoly.

Even with reform, American retailers and consumers still are forced to pony up the highest debit and credit swipe fees in the world — up to a whopping seven or eight times what Europeans are assessed.

With the overwhelming Republican majority in Congress and Friday’s inauguration of Donald Trump as president, proposals to repeal Dodd-Frank, including dumping the cap on swipe fees, is likely to hit the battle stage sooner than later. Giving banks and card networks a green light to raise fees and price-fix again shouldn’t happen. But it could take a Herculean effort to save the cap and retailers will have to be ready to speak out loudly.


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