Retailers Object to Financial Choice Act

Retailers, including grocers, are voicing their strong opposition to the reintroduction of the Financial Choice Act by Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, in a discussion draft that includes a provision to overturn the debit card swipe fee reforms of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.

According to the Arlington, Va.-based National Grocers Association, the act, if passed, would nearly double the rates that food retailers pay every time a consumer uses a debit card.

“Although the Durbin Amendment brought transparency and competition to a marketplace historically void of it, independent grocers continue to pay the highest swipe fees in the world,” noted NGA President and CEO Peter J. Larkin. “Congress should be protecting Main Street independent grocers from price-gouging, not writing it into law.”

Added Larkin: “While banks and card networks rake in record profits, independent supermarkets continue to operate on razor-thin margins in one of the most fiercely competitive marketplaces. Swipe fees are the second-largest operating costs for grocers and are out of their control. Rather than padding Wall Street’s pockets, savings from swipe fees could go to reinvesting in a grocer’s store, hiring more employees and boosting the local economy. Congress can either side with Main Street grocers or anti-competitive Wall Street banks.”

On May 1,NGA sent a letter to members of the House Financial Services Committee, urging them to oppose the legislation as long as it contains a provision to repeal the reforms.

“H.R. 10 allows the country’s largest banks to take $10 billion a year out of the hands of Main Street grocers and their customers," observed Leslie G. Sarasin, president and CEO of Arlingron-based Food Marketing Institute. "At a time when Main Street is looking for ways to create jobs and grow the nation’s economy, it will be unproductive and quite harmful if the House Financial Services Committee approves a bill that would repeal the commonsense debit reforms passed in 2010. Main Street grocers, their customers and the American economy deserve better than the negative impact this harmful bill will have.”

Continued Sarasin: “As drafted, this bill would repeal debit reforms that have proven to be successful. These reforms provide competition in debit network routing, helping to keep prices low for grocers and their customers. Repealing the law would allow the country’s largest banks to increase their profits by doubling the average interchange collected on every debit transaction.”

To protest the measure, the Washington, D.C.-based National Retail Federation (NRF) and other groups organized a fly-in that brought dozens of retailers from across the United States to the nation’s capital as Congress held a hearing on the Financial Choice Act, at which no retailers were asked to testify.

“Debit card reform has been a remarkable success,” asserted NRF SVP and General Counsel Mallory Duncan. “It has saved retailers and their customers billions of dollars and it has brought the beginnings of transparency and competition to a market where swipe fees were price-fixed and all banks linked arms to charge the same high fees. If reform is repealed, the big banks will go back to those practices, and nothing will stop them from setting these fees as high as they like and driving up prices paid by consumers in the process.”

According to Duncan, “We should be looking at the future of payments rather than trying to re-legislate this important consumer protection and vital step forward for fair market competition.”

“The Choice Act gives the largest banks and card networks a green light to charge billions in higher fees from every business in America that accepts debit cards,” said Austen Jensen, VP of Government Affairs and Financial Services for the Arlington-based Retail Industry Leaders Association (RILA). “Repealing swipe fee reform is a billion-dollar giveaway to banks that are generating record profits and passing out record bonuses; it’s a poison pill for any bipartisan effort to enact meaningful financial reform.”

Urging Congress to focus on reforms with bipartisan support, like easing business’ access to capital, Jensen further warned, “If banks go back to charging excessive fees every time a customer swipes their card, those fees will ultimately be paid by the consumer.”

The Durbin Amendment required that at least two unaffiliated debit routing networks be available for all purchases made with debit cards. The provision additionally limited debit interchange fees to 21 cents per transaction, as well as instituting a 0.05 percent fee on all transactions to cover fraud and a 1 cent fraud prevention fee.

In other governmental affairs, President Donald Trump has unveiled his long-awaited tax reforms, which proposed cutting business taxes but didn’t mention the controversial border adjustment tax that critics contend would raise prices on imported items, including foods.

Retail industry representatives were open to the proposed reforms. “Retailers pay among the highest effective tax rates of all U.S. businesses and provide jobs to more Americans than any other industry,” noted Brian Dodge, RILA’s senior EVP for public affairs. “Reform that substantially lowers the rates that retailers ultimately pay will generate job growth and benefit American families in countless ways. The president’s tax reform plan recognizes the importance of a globally competitive tax code that allows American businesses to compete around the world and grow, and for consumers to have more money to save or spend. We will continue to fight back against the harmful border adjustment tax proposed by House Republicans and look forward to working with President Trump to exact pro-growth tax reform this year.”

"We are encouraged by President Trump’s tax plan as it focuses on economic growth and job creation, while excluding a border adjustment tax which would hurt America’s consumers and employers," said Joshua Baca, spokesman for Americans for Affordable Products, a coalition made up of "job creators, entrepreneurs, and business leaders," inlcuding retailers. "As the largest employment sector in the nation, we do not believe government should be in the business of picking winners and losers; instead, its mission is putting in place policies that create conditions so that America’s workers and business leaders can focus on what they do best: grow jobs and opportunities. We will not relent in our efforts to ensure a border adjustment tax has no place in any tax policy and look forward to working toward legislation that makes our nation more competitive across the globe and places our economy on stronger footing here at home for hardworking, middle-income families."