It’s only been a few days since the Durbin Amendment, which caps the fees banks are able to collect from merchants per debit card transaction, went into effect al already retailers are rallying to attack the interchange fees on credit cards.
“We plan to do the same, if not more, to see that credit is reformed,” executive vice president of public affairs for the Retail Industry Leaders Association, Katherine Lugar, told The Hill. “Debit is step one. Credit is next. We are heading there very aggressively.”
According to retailers, they have always had their sights set on credit card interchange fees.
Although retailers did not benefit from the Durbin Amendment as much as was initially proposed, the final ruling did lower their debit card “swipe” fees by roughly half. Retail lobbyists claim that credit card interchange fees generate somewhere in the neighborhood of $30 billion a year for both card providers and banks.
“We have talked about credit and debit card fees for a long time,” said Doug Kantor, counsel to the Merchant Payments Coalition to The Hill. “We’re now in a sense refocusing on credit card fees and reminding lawmakers of the bad behavior by the banks and the credit card companies.”
However, banks put up quite a fight against the debit card interchange fee cap and their lobbying resulted in the Feds ruling a higher fee cap than what was first put forth. According to financial services lobbyists, their argument against any interchange fee reductions is even better this time around. This is because the fees banks collect from merchants for each credit card transaction acts as payment for the service banks provide — what amounts to a loan to the retailer each time a customer pays for something using a credit card.
“Credit interchange has been historically untouchable because the value proposition is more obvious. When a retailer accepts a credit card, the bank provides them the loan and forwards on the funds so the retailers benefit,” said a spokeswoman for the Electronic Payments Coalition Trish Wexler to The Hill. “People spend more on credit, so that’s good for the retailer.”
Wexler went on to predict that because most banks are now charging their customers higher fees in order to recoup some of the revenue that was lost as a result of the new, lowered debit-card swipe fees, lawmakers will be too fearful to tackle the issue of credit card interchange fee reform.
However, Max Gleischman, the communications director for Senator Dick Durbin, D-Ill., who championed changes made to debit cards interchange fees, had this to say to The Hill, “Credit-card interchange fees remain as unregulated, anti-competitive and unfair to consumers today as they did in 2008 and 2009. As big banks try to drive customers from debit cards to credit cards, credit card swipe fee reform is something we’ll be taking a very close look at.”