Merchants Celebrate Facts of Swipe Fee Reform: Tell Congress How Reform Benefits Small Business & Consumers
Washington, DC –Main Street business owners and advocates today welcomed their opportunity to expose the big banks and credit card companies’ false claims and to educate Congress with the real facts of swipe fee reforms—and the many ways in which reforms will benefit merchants and lead to more freedom, choices, and discounts for consumers.
“Lower merchant costs translate to lower customer prices, it’s as simple as that,” said Lyle Beckwith, Senior Vice President of Government Relations at the National Association of Convenience Stores. “Unlike the big Visa banks, which operate in a non-competitive environment where price-fixing is the norm, merchants base their business decisions on the price-competitive retail environment where price is king. If Store A doesn’t pass those savings on to its customers, you can bet that Store B will start offering discounts and gaining a huge market share in the process.”
While the big banks and credit card giants have been attempting to spin their message to look like the friends of consumers, real consumer advocates know the truth. That’s why consumer groups—not always friendly to business interests—strongly support swipe fee reform: they know it can’t help but lead to lower prices for consumers.
In their testimony to the House Financial Services Committee, US PIRG, Public Citizen and the Hispanic Institute wrote that “There is no evidence that swipe fee regulation will lead to an increase in consumer fees” and that “Reductions in swipe fees should result in substantially lower prices for all consumers.”
“The choice is clear for Members of Congress; stand up for small business owners and their customers or stand up for Visa, MasterCard and the world’s biggest banks and their unfair rules and excessive fees,” said Amar Ali, Vice President and General Counsel at A to Z Wholesalers, Inc. in Dallas, Texas.
The small business representatives who testified at the hearing today stressed the importance of swipe fee reforms to Main Street florists, convenience stores and restaurants—and urged Congress to implement the bipartisan swipe fee reforms on time and as written.
“If the banks would compete on their fees rather than fixing prices, the Federal Reserve’s regulation would not limit what they charge,” said Doug Kantor, Counsel to the Merchants Payments Coalition and a witness at today’s hearing. “The choice is theirs and it’s about time they chose what is better for everyone—competing on price so that Main Street and consumers win.”
The Federal Reserve’s proposed rule, which will be finalized on April 21 and implemented by July 21, would ensure swipe fees are “reasonable and proportional,” and rein in the excessive fees that have tripled in the past ten years—even as the cost of processing a transaction has dropped. Any delay in implementation would cost Main Street business owners and consumers more than $1 billion per month in debit card swipe fees.
The proposed rule was born from the bipartisan Durbin amendment that was included in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bipartisan efforts to fight the big banks and credit card giants and rein in out-of-control swipe fees sent a clear message that the broken system needed to be fixed in order to protect consumers and merchants. The Durbin amendment will allow merchants to offer consumer discounts for customers who pay with less expensive forms of payment.
“We’re not looking for a free ride, just for fees that are fair and reasonable,” said Dennis Lane, who has owned and operated a 7-Eleven in Quincy, MA for more than 36 years.
In the current market, Visa and MasterCard abuse their market power by helping competing banks collectively determine swipe fees, and allow no room for merchants to negotiate the rates. The Federal Reserve’s debit card regulations apply as long as the big credit card companies continue to fix prices and refuse to negotiate rates with retailers. The rule stipulates that any company that institutes competitive swipe fee rates will be free to charge a competitive rate that is not subject to the regulation.
Main Street businesses and their customers pay billions of dollars each year to the big banks and the dominant credit card companies in the form of swipe fees that are charged each time a customer pays with plastic.
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