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Overtime rule and swipe fees endanger dealers

If you think the matter of the new overtime rules or the amount you pay as a retailer in swipe fees are all finally settled, think again. There’s a move in Congress against the new overtime rules (do I hear applause?) while the reductions in swipe fees might go out the window (boos and jeers).

First, a mere three weeks after the new federal overtime rule got the nod, retailers are cheering a just-announced attempt to halt the measure. Dubbed the “time clock rule,” legislation has now been introduced under the Congressional Review Act to block the Obama administration's overtime rule. The rule will result in workers punching a clock when they come and go from work, making it very difficult to implement flexible work arrangements.

Sens. Lamar Alexander (R-Tenn.), chairman of the Senate Labor Committee, and Ron Johnson (R-Wis.), chairman of the Homeland Security and Governmental Affairs committee, introduced legislation backed by 44 more lawmakers as co-sponsors. If passed, the legislation would nullify the rule and prohibit the administration from issuing a similar rule without congressional approval.

This is part of the Department of Labor’s increase of the threshold for employee overtime pay. The department's rule announced last month virtually doubles the salary threshold from $23,660 to $47,476, effective this Dec. 1. It should be no surprise that businesses in general, and groups like the National Retail Federation, are in favor of the proposed legislation. So the overtime rule might not be a done deal after all.

The swipe fee threat

It was five years ago that a drawn-out battle between banks and retailers over swipe fees that retailers must pay banks was settled under the Dodd-Frank financial reform legislation. Swipe fees were ultimately reduced from 44 cents to 21 cents per transaction.

Now, the chairman of the House Financial Services Committee, Rep. Jeb Hensarling (R-Texas), has proposed replacing Dodd-Frank. But retailers in a myriad of industries have been quick to oppose the move, specifically fearing a repeal of the Durbin Amendment in Dodd-Frank that mandated the reduced swipe fee cap.

You’ll recall before the Durbin Amendment was added to Dodd-Frank, the 44-cent swipe fees were sucking some $16 billion a year out of retailers and consumer pockets into the banks. The fee amounts were being set by Visa and MasterCard, which own the payment networks and passed the money to the banks. The Durbin Amendment required the Federal Reserve to set “reasonable and proportional” debit swipe fees that reflect the real cost of processing a transaction. Even today, retailers say the current 21-cent fee is still an unjustifiable rip-off and should be more like 12 cents or less. But for now, it is what it is.

The financial services industry attempted to get Congress to toss out the Durbin Amendment in 2010 and 2011. Both efforts failed.

In effect, any repeal of the Durbin Amendment would allow the banks to again play the price-fixing game and eliminate what little competition there is in this market. Clearly it would not be good for any retailer who accepts debit cards (virtually all) or any consumer who uses their debit card.



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