In a House Financial Services Committee hearing today, members of Congress grilled Federal Reserve Governor Sarah Bloom Raskin over the Fed’s proposed rule that could cap debit card “swipe fees” between 7-12 cents per transaction. During the hearing, members of Congress accused the Fed of “price fixing” and of ignoring the impact of these fee restrictions on small community banks and credit unions.
Several members expressed interest in delaying implementation of the proposed rule, which currently is required to be implemented July 21, 2011. Governor Raskin responded by noting that’s a decision for Congress to make.
[Resource: Credit.com’s Consumer Guide to the Proposed Debit Interchange Rule]
The mood in the first half of the hearing favored a delay, if not an outright appeal, of the Durbin Amendment. But during the second half of the hearing, the debate expanded after several business owners offered testimony reminding committee members why the legislation was enacted in the first place.
Gus Prentzas of Pavilion Florals owns a floral shop and a health club. He testified that rising interchange fees forced him to lay off an employee. He repeatedly expressed his frustration at not being able to find out the amount of fees he must pay until he gets his statement at the end of the month.
David Seltzer, Vice President and Treasurer of 7-Eleven, who also testified on behalf of the Retail Industry Leaders Association, said that after payroll, interchange is the largest cost for 7-11 stores, and he called it the “only cost beyond our control.” He noted that interchange fees have quadrupled from $40 million in 2002 to $177 million in 2010.
Doug Kantor, Partner, Steptoe & Johnson who testified on behalf of the Merchant Payments Coalition took the more extreme position. He said that a 12 cents cap is too high and insisted that these fees should be zero.
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On the other side of the argument, David Kemper, Chairman, President and C.E.O. of Commerce Bank, warned that under the current Fed proposal his bank’s profit margin will go from $35 per checking account to a $27 loss per account.
In the end, it was easy to understand the dilemma members of Congress must be in as they field opposing comments from their small business, consumer, and banking constituents.
Representative Jim Renacci (R-OH), who has experience as both a retailer and a bank board member, asked the question that hung over the hearing today; “Who is going to win and lose here?”
Image: vamapaull, via Flickr.com
Gerri Detweiler Gerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.
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In addition to interchange businesses are charged a markup above interchange by their credit card processor. Many businesses can save a lot of money by renegotiating those fees. I used an online comparison shopping service called FeeFighters.com to automatically do that negotiation and it saved me a lot of money. So, to the manager at the 7-11 in the article, it’s not entirely beyond your control.