Retailers urge Congress to reject the new bill that will lead to greatly increased debit card swipe fees.
Congressman Randy Neugebauer (R-Texas) recently composed and introduced a bill that would repeal the Durbin Amendment, which was passed in 2010 to reform the fees that merchants pay to accept debit card payments, and a number of retailers have joined together to oppose the new bill.
In a letter to members of Congress, retailers debunked arguments made by the financial services industry and urged them to reject Neugebauer’s bill.
“This bill is nothing more than a legislative earmark for the largest financial institutions in the country. Only in Washington will you find people who think Americans have not given Wall Street enough of their hard-earned money,” RILA’s executive vice president for government affairs, Jennifer Safavian, said in the letter.
“If Congress is intent on bringing substantial change to the payment ecosystem, the retail industry encourages all elected officials to consider the challenges of today and tomorrow and not relitigate an issue from the past,” added Safavian.
The full letter to Congress is included below.
June 16, 2016
Dear Member of Congress:
Congressman Randy Neugebauer (R-TX) recently introduced H.R 5465 to once again put the largest banks in America and the major card brands ahead of the American consumer and Main Street businesses. Specifically, this legislation repeals the important debit swipe fee reforms contained in the Dodd-Frank Act—more commonly known as the Durbin Amendment.
The Retail Industry Leaders Association (RILA) is strongly opposed to H.R. 5465, or any other legislative vehicle to weaken or repeal the Durbin Amendment. RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs, and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.
The facts being presented by the banking community for the introduction of this bill—especially those coming from Wall Street—simply do not add up. It is important to remember the Durbin Amendment only covers banks with more than $10 billion in assets, which means 98.6% of financial institutions in this country do not have to comply with the swipe fee reforms.
There has also been a false argument that the Durbin Amendment would harm smaller banks. The recent study by the Philadelphia Federal Reserve in the first quarter of 2016 indicated that after the debit reforms went into place, “the volume of transactions conducted with cards issued by exempt banks grew faster than it did for large banks.” The study concluded, “The evidence does not support the claim that competitive forces have effectively imposed the interchange fee ceiling on small banks.”
The banks have also claimed that the Durbin Amendment has resulted in consumers losing the benefit of free checking. However, the American Bankers Association’s (ABA) own study shows more Americans have free checking today than they did before the Durbin Amendment passed. In 2010, the ABA reported that 53% of consumers had free checking compared to 61% last year.
The dire predictions by the largest banks have never come to fruition. In fact, the only full comprehensive study done on this issue by economist Dr. Robert Shapiro shows the Durbin Amendment saves consumers six billion dollars per year and created 37,000 jobs in the first year alone.
If Congress is intent on bringing substantial change to the payment ecosystem, the retail industry encourages all elected officials to consider the challenges of today and tomorrow and not relitigate an issue from the past. The current dominance by Visa and MasterCard in the credit and debit markets are preventing new players from entering the payments world who would offer robust competition and new technological advancements. One of the primary pillars of the Durbin Amendment was to bring competition and transparency to the debit market, which was void of it. This specific reform was paramount for retailers—especially small business who now have the ability to bring in other routing options outside of Visa and MasterCard and avoid their draconian fee structure. The ripple effect from this free market policy has allowed businesses to be more competitive in the economy.
Congress should listen to businesses of all sizes and understand swipe fee costs are second only to payroll for most businesses. Repealing the Durbin Amendment would give more control to the duopoly of Visa and MasterCard and a bonus check to the largest banks.
This bill is nothing more than a legislative earmark for the largest financial institutions in the country. Only in Washington will you find people who think Americans have not given Wall Street enough of their hard-earned money. RILA once again urges all members to oppose any effort to repeal or weaken the Durbin Amendment and instead stand with American consumers and Main Street businesses.
Executive Vice President,