Retailers, banks continue sparring over swipe fees

Retailers will be in Washington this week for a conference and will lobby House and Senate lawmakers as well as White House officials on a broader retail-based agenda that includes swipe fees, simplifying the corporate tax code, sales tax fairness and free-trade issues. 

The Federal Reserve is expected to cap fees at 12 cents per transaction when it unveils its rule by July 21, compared with an average of 44 cents per transaction that results in about $1.3 billion a month in revenue for banks.

Meanwhile, the ABA’s chief executive, Frank Keating, sent a letter on Monday to the Federal Reserve Board, urging revisions to the proposed swipe-fee rules “to minimize harm posed to consumers, community lenders and the U.S. payments system.”

“This will result in irreversible harm to local communities and the banks that serve them,” Keating said.

The letter comes after the June 8 rejection of a Senate amendment that would have delayed the implementation of the new swipe fees proposed by the Fed.

Keating argues that the 54 votes the amendment received shows that a majority in the Senate backs a delay. 

“While short of the 60-vote procedural threshold reserved for many controversial issues, it is clear that a majority of the world’s greatest deliberative body has sent a very strong message of concern over the approach taken by the Board in this rule,” Keating said. 

Sen. Dick Durbin (D-Ill.) authored the amendment that is included in the Dodd-Frank regulatory overhaul law, and has been in a heated battle for nearly a year between retailers and banks. 

In the letter, Keating asked the central bank to consider the cost of maintaining the debit interchange system, noting that its “narrow interpretation of the statutory language fails to consider a broad range of costs necessary to carry out individual transactions.”

“Such an interpretation excludes, among other elements, an appropriate allocation of fixed and overhead costs, as well as such elements as fraud losses, network fees applicable to individual transactions, and an appropriate allocation of customer service costs,” he said. “We strongly believe that such costs need to be included in any cost calculation under existing law.”

ABA’s letter also encourages the Fed to take action to minimize the harm incurred by community banks. 

“A primary driver for harm has been the Board’s narrow reading of allowable costs, which will create market incentives to drive business away from community banks to lower-cost debit card providers,” Keating said.  

Keating also urged the board to recognize the hardships of implementation and compliance associated with this complex rule, and to extend any compliance deadlines where needed.

“The rule proposed by the board will have enormous impact on the existing payments system infrastructure which, if done in haste, could have sizeable negative impacts for individuals, consumers and our broader economy,” he said. “We urge the Board to use its existing authority to provide banks and payment networks with a reasonable chance to meet their obligations under the law. That period should be no less than the three-month window envisioned by the statute as enacted.”