Home » Federal Reserve Final Swipe Fee Ruling Angers Retailers, Consumers Nationwide

Federal Reserve Final Swipe Fee Ruling Angers Retailers, Consumers Nationwide

Last updated on June 13th, 2024 at 12:08 pm

by Millie Adcox/staff writer

The U.S. Federal Reserve’s backpedaling and final ruling on debit card swipe fees on June 30 is the result of much lobbying and backroom high pressuring from U.S. banks that saw their revenue leaking like a sieve from their bottom line, according to several industry trade groups.

“Every month the largest banks and credit card companies reap over $1 billion a month in debit swipe fees off the backs of Main Street businesses and consumers. It’s extremely unfortunate that the Federal Reserve ceded to the bank’s lobbying to increase the allowable debit swipe fees. Independent grocers and our customers are very disappointed that they will not benefit from the important reforms Congress intended. We fought for years to persuade Congress to reform debit interchange and we finally succeeded. This afternoon the Federal Reserve reversed our victory and every independent grocer in America has a right to be angry and disappointed,” said Peter J. Larkin, president and CEO of the National Grocers Association (N.G.A.).

The final ruling issued June 30 set a per-transaction debit swipe fee of 21 cents, which is significantly higher than the Federal Reserve’s originally proposed rate of 7 cents or the compromise rate of 12 cents, yet lower than the current 44 cents. The rules also add 0.05 percent of the transaction amount for fraud prevention.

The Federal Reserve’s final rules on debit card swipe fees “is an irresponsible abdication of its legal duty to implement the law as written,” said Lyle Beckwith, SVP of government relations for NACS, the national association for petroleum retailers.

NACS Chairman Jeff Miller, president of Norfolk, Va.-based Miller Oil Co., added, “A cap of 21 cents per transaction is better than the current average of 44 cents per transaction, but it is more than 400 percent more than the 4 cents per transaction that a Fed-sponsored survey of banks found to be the real cost of processing a debit transaction.”

As for consumers, the new ruling could impact them beyond the cap of 21 cents per transaction as banks have threatened setting transaction limits in order to reap some of the lost revenue.

The Daily Caller quoted Richard Hunt, president of the Consumer Bankers Association in Virginia, who says the landscape of retail banking will be forever changed as a result of this “congressionally mandated price fixing.”

“Unfortunately, it is consumers who will ultimately bear the burden,” he said in a statement.

In an IBOPE Zogby Poll, a majority of consumers surveyed support a cap on bank swiping fees, but not if it leads to transaction limits. The interactive poll conducted June 17-21 also showed 60 percent support for increased regulation on bank fees and 56 percent saying the most likely consequence of such regulations would be increased bank-imposed restrictions on services.

According to the poll, big banks and Wall Street are viewed favorably by only 11 percent, with 81 percent being unfavorable.

“Today the voice of big banks drowned out the cries of consumers and Main Street merchants in the ears of the Federal Reserve,” said Leslie G. Sarasin, president and CEO of FMI. “This ruling is inconsistent with the proposed ruling issued last December and utterly fails to be true to the spirit of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed more than a year ago. It will not provide sufficient reform for businesses that are currently fighting high debit swipe fees. Merchants and customers across America are the big losers today.”

The final ruling of 21 cents per transaction will begin to be implemented Oct. 31.

In mid-June, kudos and celebratory high-fives were shared throughout the industry when the Federal Reserve ruled that on July 21 banks must cap fees at 12 cents per debit card transaction vs. the current average fee of 44 cents per swipe. It represented a major coup for retailers after a long battle against banking lobbyists in Washington, D.C., who sought to delay implementing the new rule. Sen. Dick Durbin (D-IL), who wrote the provision to limit the swipe fees, said before the June 8 vote that banks were looking for another bailout with the delay—“this time not from taxpayers; this time from consumers and businesses across America.”

Banks, which stand to lose an estimated $8 billion to $15 billion annually, campaigned hard against the reduction, asking for the delay to “study” the rule, hoping, many believe, to kill it. It didn’t kill it, but the political pressure ultimately altered the original Federal Reserve ruling.

About the author

Shelby Team

The Shelby Report delivers complete grocery news and supermarket insights nationwide through the distribution of five monthly regional print and digital editions. Serving the retail food trade since 1967, The Shelby Report is “Region Wise. Nationwide.”

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