Public Policy Issue Briefs

Issue: Debit Card Swipe Fees
Overview:The NRA encourages Congress to keep moving forward with swipe-fee reforms.

Background

• Restaurateurs and other merchants who accept debit cards worked for years to address uncontrolled increases in debit-card swipe fees. Congress passed the Durbin Amendment in 2010 to try to fix the broken debit-fee market by ensuring that the fees merchants pay when guests pay by debit card are "reasonable and proportional" to the cost of processing debit transactions.


• The Federal Reserve issued a final rule June 29, 2011, to implement the Durbin reforms. Starting Oct. 1, 2011, the rule imposes a first-time cap on covered merchant debit swipe fees. The cap is 21 cents per debit transaction, plus 0.05% of covered transactions. This wasn't as good for merchants as the Federal Reserve originally proposed, but it's a significant drop from the average 44 cents that merchants paid per debit transaction before Oct. 1.

• Congress's debit swipe-fee reforms are working. Big banks and card companies predicted disaster after the Durbin Amendment took effect; that hasn't happened. The reforms have brought more competition and transparency. Small banks are thriving, merchants can keep prices down, and consumers realize the benefits.


• While the new caps have resulted in fairer debit swipe fees for hundreds of thousands of merchants, some merchants with lower-ticket transactions have seen debit swipe fees rise since Oct. 1. This is a result of banks' lobbying to weaken the Federal Reserve's final rule. The NRA in February 2012 joined other merchants groups in a lawsuit that seeks to force the Federal Reserve to adjust its rule. Congress never intended to allow card networks to significantly raise swipe-fee costs for merchants with lower-ticket transactions well above reasonable levels.


• Big banks remain unhappy with the Durbin reforms. The reforms cut into their ability to charge merchants unlimited debit-card swipe fees that remain hidden to consumers.


• Many members of Congress are sympathetic to the debit-card industry's arguments. Reps. Jason Chaffetz (R-Utah) and Bill Owens (D-N.Y.) introduced H.R. 3156 in November 2011 to repeal the Durbin Amendment. The NRA opposes H.R. 3156, just as it opposed an effort by some U.S. Senators in June 2011 to derail the Durbin Amendment's reforms. (That effort failed; ; 45 senators voted to keep the reforms moving forward, thus denying Durbin opponents the 60 votes they needed to block the reforms.)


• The NRA and its allies in the Merchants Payments Coalition encourage policymakers to examine the broken market for credit-card swipe fees. U.S. consumers and businesses pay the highest credit-card swipe fees in the world. Fees are neither transparent nor competitive.


• More comprehensive changes are needed to address fraud and security. The card companies and banks have been slow to invest in fraud-prevention technologies in part because they know they can force U.S. merchants to absorb the costs of card-payment fraud. As mobile payments gain ground, it's critical that the U.S. make fundamental changes to ensure that the flawed swipe-fee system doesn't apply to new forms of payment.

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