NRA implores Congress: 'Keep debit-swipe fee controls in place'
The National Restaurant Association has joined forces with dozens of other restaurant groups to launch a campaign against repealing debit swipe-fee protections under the Durbin Amendment, which passed in 2010 as part of the Dodd-Frank Act.
The issue is coming before the U.S. House of Representatives March 28 as part of the Financial Choice Act, proposed last year by Financial Services Committee Chair Jeb Hensarling. If passed, it would repeal the debit card swipe-free protections under the Durbin Amendment.
As part of the Dodd-Frank Act, the Durbin Amendment controls the price banks levy on merchants for debit card use by customers. It was believed that the savings might be passed on to consumers, but research from SSRN indicates that did not happen. The Financial Choice Act repeals the provisions of the Durbin Amendment and lets banks essentially charge debit swipe fees without caps, which the NRA said would lead to uncontrolled fees, while others believe it would allow banks to pay what it costs them to cover debit swipe fraud and processing. Supporters, however, argue that it would allow banks to pass on the money saved to their customers and result in smaller debit swipe fees for smaller businesses and restaurants.
The NRA was among the organizations who, seven years ago, sought to achieve protections from the charges. The organization argues that restaurateurs have reported that the fees are among their largest business costs after labor and food. Now, those protections under the Durbin Act face repeal and return to a pre-2010 system that the NRA said was unfair and nearly impossible for restaurateurs to operate under.
"In the years leading up to 2010, our members saw the cost of processing a debit transaction skyrocket from zero cents to approximately 44 cents per transaction," said a news release from the NRA about the launch of the campaign against the repeal. "If restaurants wanted to accept debit cards, they were forced to sign restrictive contracts with card companies. This prevented our members from negotiating a lower price, accessing an alternative processing network and offering customer discounts for use of cash, checks and debit cards without penalty from the card networks."
Under debit swipe-fee reform mandates, however, the Federal Reserve has to create fees which are considered "reasonable and proportional" to the cost of transaction processing. But, the NRA said that Hensarling's Financial Choice Act undoes all that. The NRA pointed out in its letter to the U.S. House of Representatives this week that restaurants already have a slim profit margin of 3 to 6 percent, and even that would be greatly threatened if debit swipe fees increased as they did previously to approximately 44 cents per transaction.
"Passage of the debit swipe-fee protections reduced debit swipe-fee rates to today's average between 24 and 27 cents per transaction," the NRA wrote in its letter to Congress. "In addition to the lower rates, the reforms also allow merchants to offer customer discounts for use of cash, checks and debit cards without penalty from the card networks. Importantly, restaurants are now able to choose from at least two independent payment networks, which injects much-needed competition into the market."