House Financial Services Chairman Jeb Hensarling (R-TX) had proposed a repeal of the Durbin Amendment, also known as the swipe fee reform, in his Financial CHOICE Act introduced last year.
The Durbin Amendment, named after Sen. Dick Durbin (D-IL), is part of the Dodd-Frank Act. It put a cap on debit card interchange fees, which are charges stores pay banks when a customer uses the card. The idea was that lowering fees would lower prices for consumers.
“Preserving swipe fee reform is essential for the retail community and will remain our top priority in the debate over financial reform. If repealing this critical reform remains a part of the Choice Act, retailers will remain opposed,” Austen Jensen, vice president of government affairs for RILA, said. “The nation’s largest banks and credit card companies are raking in record fees and record profits—and passing out record bonuses. Financial reform should not be a vehicle for Wall Street to get even fatter on the backs of Main Street. But retailers will fight any effort that gives the largest banks and credit card companies a green light to fleece merchants and our customers again.”
Javelin Strategy & Research and the Electronic Payments Coalition, however, released a report last week that shows small merchants are more concerned about value, and less concerned about price, regarding fees that they pay for debit card transactions.
The study found 66 percent of merchants are satisfied with what that they pay in fees — with only 11 percent dissatisfied — and that small retailers are even happier when allowed to choose additional benefits even at a greater cost.
Small merchants said they were satisfied with the “overall low cost” of their fees, as well as the transparency and value they get from their partners in the interchange system. Merchants also said that they chose those partners for reasons other than price. Only about one percent of merchants were dissatisfied and looking for a new acquirer with lower fees.
“Over and over we’ve seen that the Durbin Amendment benefited the largest retailers while Main Street lost,” Molly Wilkinson, executive director of the Electronic Payments Coalition (EPC) said. “These price controls have unfairly burdened consumers, community financial institutions, and small businesses. By restoring the free market, small merchants will have greater flexibility to find the debit card plan that works for them and their customers.”
The Javelin/EPC study also shows merchants prefer credit cards—no matter the cost of the purchase—over debit cards even though credit cards tend to have higher costs.