The nation’s leading retail trade group is pushing the Federal Reserve to lower the amount banks charge merchants for debit card transactions.
The National Retail Federation (NRF) said the cap set five years ago under the Dodd-Frank financial reform law is too high.
Though the Fed had proposed a cap no higher than 12 cents, the NRF said banks were able to successfully lobby for 21 cents plus 0.05 percent of the transaction for fraud recovery and another 1 cent for fraud prevention in most cases, which works out to about 24 cents per transaction.
In a letter this week, NRF Senior Vice President and General Counsel Mallory Duncan asked the Federal Reserve for a lower cap when it is reviewed this spring.
Though Duncan admits both merchants and consumers have realized savings as result of the regulation, since the average was 45 cents before the cap, she said 24 cents is still substantially higher than issuers’ incremental costs.
As a result of the high fees, she said, the average net profit for retail varies from slightly over 1 percent for the grocery sector to slightly under 4 percent for high-end specialty stores.
Now, with banks shifting more fraud liability to merchants, Duncan argues that tacking on the additional 0.05 percent for fraud recovery might no longer be needed.