The battle over debit card swipe fees was anything but stuck in the mud last Friday on Capitol Hill. More than 100 small retailers asked Congress to protect billions of dollars in pending cuts in the fees, which they say will help them keep capital to grow and create jobs, or which they can pass on to consumers through lower prices.
"In my business, the swipe fee folks, the interchange folks, the financial services folks, are the only entity in my retail world that I cannot negotiate with," said Dennis Lane, president of the New England 7-Eleven Franchise Owners Association. "I can sit down and negotiate with Coke and Pepsi and all the folks that I do business with. I cannot negotiate with the Visas and the Mastercards of the world."
According to Federal Reserve in 2009 consumers used debit cards in nearly 38-billion retail transactions. Banks collected more than $16 billion in interchange fees on them.
Under financial regulation reform Congress gave the Federal Reserve the power to cut them. And it did by about $12 billion a 70% reduction--effective this July. Now financial firms including many small community banks and credit unions argue that the savings will just pump up profits mainly for big retailers and that consumers may not end up saving much money.
"If financial institutions have to cover all of the costs or virtually all of the costs of debit, they will have to make it up somewhere," said Bill Hampel, SVP of the Credit Union National Association. "And the most likely way to make that up is through increased fees on the consumers who use the debit cards. So, that could be things like a monthly fee to have access to a debit card or a per-transaction fee."
Financial firms support legislation that would put the cuts on hold for a year or two to give the Fed time to study them further.
Peter Barnes joined FOX Business Network (FBN) in September 2007. He serves as FBN's senior Washington correspondent.