The convenience and petroleum retailing industry has recently suffered a blow surrounding the financial overhaul law that was originally established to help retailers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law over a year ago, contains the Durbin amendment, added to curb the rising debit card fees charged to retailers. The legislation states credit card companies need to keep the so-called swipe fees “reasonable and proportional” to the processing transaction. In December, the Federal Reserve proposed a small cap, but earlier this summer, the limit was set at 21 cents plus 0.05 percent of the transaction amount.
In an almost hostile move made by Visa and MasterCard, the payment networks announced that they would raise debit card fees charged for small-ticket purchases to the cap amount. Currently, fees are 8 cents on a $2 purchase and would be raised to 23 cents.
“This proves that the Fed really got it wrong with their final rule,” said Lyle Beckwith, senior vice president of government relations at the National Association of Convenience Stores. “This law wasn’t passed by Congress to give a loophole to the payment card industry.”
“They really watered down the expectations we had when Dodd-Frank was passed,” said Brandon Wright, manager of regulatory affairs and communications at the Petroleum Marketers Association of America. “We thought we’d get real reform on the debit card fees.”
In the proposed rule, the Fed stated a 12-cent cap would be put on debit swipe fees. “That still would’ve have given the credit card companies a 300 percent margin,” Wright said. The Fed had come out earlier this year saying it only costs the payment card companies 4 cents a transaction.
“So when the final rule came out that it would be 22 cents and go as high as 24 cents, we were really surprised,” he said. Plus, no real explanation was given as to why the cap amount was doubled. “But 24 is better than 44, so there’s some relief there.”
The announcement to hike the swipe fees by Visa and MasterCard is troubling to convenience and petroleum retailers, but could be even more disturbing for the larger economy.
“This also proves that there is no competition in the (credit card) market,” Beckwith said. He added that Visa promised they wouldn’t raise fees and MasterCard went ahead and did, so Visa had no choice but to do it too.
“Clearly, what’s going on here is the credit card companies are snubbing their nose at Congress,” said Beckwith. “They are pushing consumers to use credit cards by getting merchants to not want to take debit.”
As for this move possibly opening the door for repealing Dodd-Frank, it’s not likely, at least for now.
“The banks will try to repeal Dodd-Frank the first chance they get, which looks to be when there is a Republican Senate,” said Beckwith.
“There is a whole host of reasons why people want to repeal Dodd-Frank, and not just because of the Durbin amendment,” Wright said. “A lot of small government folks think Dodd-Frank goes too far.” Some Republican presidential candidates have said that they would repeal it, but Wright thinks we won’t see anything like that happen until there is a new Congress or administration.
“Senator Corker said it best that they’re done with this,” he said. “There just doesn’t seem to be any real appetite on the Hill to do anything about the debit swipe fees.”
The next thing on the agenda at PMAA, who works with the Merchants Payments Coalition, is credit card swipe fees.
“We’d rather see the credit card companies compete with interest rates,” Wright said.
So how does this latest movement regarding debit card fees affect relief for retailers on the credit card swipe fees? “It gives us an opportunity to talk about it.” But he doesn’t see a real opportunity to get any action on the credit fees until the next elections.