Credit/Debit Cards

NRA: Swipe fee settlement fails to protect industry, customers from excessive fees

National Restaurant AssociationThe National Restaurant Association expressed on Thursday its continued objection to a proposed settlement involving credit card swipe fees, saying the settlement fails to protect the industry from excessive and hidden fees.

“The National Restaurant Association represents a diverse industry with hundreds of thousands of locations and millions of employees, and we strongly object to the proposed settlement agreement,” Scott DeFife, the executive vice president of policy and government affairs at the NRA, said. “A settlement is supposed to resolve issues at the center of the dispute. This proposal neither protects our members or consumers from excessive, hidden, and continuously increasing swipe fees, nor changes card network practices.”

DeFife noted that credit cards, which are used as a common form of payment in restaurants, carry swipe fees of over four percent of restaurant sales, on average. When taken into account that the average profit margins for restaurants range from three to five percent, DeFife said the excessive fees hurt restaurants’ ability to grow.

The NRA is just one of several parties to a lawsuit filed in 2006 against MasterCard, Visa and their member banks. Negotiations have been ongoing, resulting in a proposed settlement agreement filed last July.

Under the proposed settlement, Visa and MasterCard agreed to pay $6.05 billion to merchants and temporarily reduce swipe fees by an amount totaling $1.2 billion. The payment networks also agreed to eliminate rules banning merchant surcharges—a right merchants have said would help recoup costs and encourage the payment networks to lower rates, The Wall Street Journal reports.

Liz Garner, the director of commerce and entrepreneurship at the NRA, said the organization is concerned that if the settlement is approved, it could harm the emerging mobile payments market.

“We see plastic cards and mobile phones as fundamentally different payment products and believe they should be treated as such,” Garner said. “We have concerns the proposed settlement will further solidify efforts by the major card networks to impose the current system on unwilling and uninterested merchants as we move to mobile platforms. That behavior will be detrimental to restaurants, customers and the economy.”

Garner also said that if the settlement’s release of claims remains unchanged, it would inhibit the ability of merchants to challenge Visa and MasterCard’s rules and rate changes in the future.

“With their control of over 80 percent of the credit-card market, very rarely, if ever, would either company face any barriers to doing as they choose,” Garner said.

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