The cost of doing business in a debit card world may get a little less expensive.
The Federal Reserve Board is expected to discuss lowering debit card swipe fees, also known as interchange fees, when it meets on Oct. 25 — news that was welcomed by retailer associations across the United States, including the Retail Industry Association (RILA) and the National Retail Federation (NRF), and NACS.
“Today’s action by the Federal Reserve to begin the process of lowering the interchange rate on debit transactions for all merchants is a long day in the making and is strongly supported by RILA,” said RILA Executive Vice President, Government Affairs Austen Jensen when the news broke on Oct. 17. “Over the past 12 years, the largest financial institutions in the country have seen their costs decline and their margins explode. The decision today to adjust debit interchange rates to accurately reflect the actual costs that card networks and the largest banks bear should be applauded.”
According to the Federal Reserve’s website, the board members will consider proposed revisions to the board’s debit interchange fee cap; however, it did not detail the proposed revisions. A 21-cent cap was implemented in 2011 after Federal Reserve was directed by Congress under the 2010 Durbin Amendment to set regulations for debit card swipe fees.
“Congress told banks a dozen years ago that debit card swipe fees should be ‘reasonable and proportional’ but they’ve never been either,” said NRF Chief Administrative Officer and General Counsel Stephanie Martz. “It’s time to set the cap that Congress intended and recognize that banks’ costs to process transactions have dropped significantly. Doing so would reduce costs for retailers and give them more savings to share with their customers by holding down prices in a time of inflation. These fees have been too high for too long and we’re glad to see the Fed is finally ready to act.”
NACS also applauded the news of a possible change. “Debit cards are an electronic version of checks that have saved banks billions compared with handling paper checks, but swipe fees make them much more expensive for merchants and drive up prices for consumers,” said Doug Kantor, NACS general counsel and Merchants Payment Coalition executive committee member.
“The Fed tried to address high debit card fees over a decade ago but didn’t go far enough, and banks’ costs have continued to fall while fees have stayed the same. It’s time for the Fed to update how much banks are allowed to charge and recognize that consumers, merchants and the economy can’t afford overinflated fees,” he added.