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Interchange fee battle heats up

Trish Wexler

Last month, several New York gas stations blamed the Durbin Amendment for exorbitant fees they were charging for debit card transactions, a move that angered consumer advocates and has contributed to the ongoing debate over the controversial Durbin Amendment.

While the Merchants Payment Coalition claims that “hidden fees” charged by card processors and banks tack on 10 cents to the price of gas, the Electronic Payments Coalition argues that gas would be much less expensive if only station owners would pass on the reported $1 billion in savings resulting from the Durbin Amendment, according to USA Today.

Consumer advocates, merchant groups and financial institutions have been engaged in an ongoing battle over debit card fees. In June, the Federal Reserve issued the Durbin Amendment, a final rule that caps “swipe” fees — the amount a bank can charge a merchant to process a debit transaction — at 21 cents per transaction plus 0.05 percent of the purchase price.

Last week, the Fed issued a report that revealed that retailers are paying much less in swipe fees since the rule took effect — an average of 24 cents per transaction compared to the previous rate of 43 cents, USA Today reports.

Critics of the swipe fee, however, maintain that retailers have seen the savings but are not passing them to consumers as promised, though retailers argue that consumers have seen the benefits of lower swipe fees. According to data from the EPC, more than 75 percent of retailers have either raised prices or kept them the same after Oct. 1.

“What this all boils down to is that when Congress gets in the middle of a debate between two industries, consumers lose,” Trish Wexler, a spokeswoman for the EPC, said. “In this case, Congress gave giant retailers an $8 billion handout – after lobbying ‘promises’ of lower prices for consumers at the register. No one is surprised to see that retailers are keeping billions of dollars for themselves, while their customers continue to be punished. Americans should demand what’s theirs – a discount for debit.

Though the lower swipe fee has benefited larger retailers, smaller retailers have struggled to realize the benefits of the rule. Before the rule took effect, card processors offered discounted fees for transactions under $10. Since the rule took effect, however, card processors are treating the 21 cent price ceiling as the default price floor for these smaller transactions, which ultimately translates to higher costs for the retailer, according to USA Today.

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