Indie Grocers Fight to Keep Swipe Fee Reforms
About 300 independent supermarket companies and several state and national trade associations have sent a letter to Congress urging members to preserve the debit card swipe fee reforms, also known as the Durbin Amendment, which was passed in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The letter was sent in anticipation of Rep. Jeb Hensarling (R-Tex.) reintroducing the Financial CHOICE Act, which would undo the Durbin Amendment.
In the letter, independent grocers expressed concern over the negative impact that the repeal of the Durbin Amendment would have on their daily operations and bottom lines. The amendment reformed price fixing in the debit marketplace by requiring that two unaffiliated debit-routing networks be available for all purchases made with a debit card, and limited interchange fees to 21 percent per transaction. It also required a 0.5 percent fee on all transactions to cover fraud losses and a 1 percent fraud prevention fee. The average swipe fee is now 24 cents. Debit cards were the most frequently used method of payment in 2015, according to a recent study of independent supermarkets, and their usage has doubled since 2000.
“Prior to the implementation of debit reforms, Visa and MasterCard were able to sign exclusivity agreements with banks, effectively eliminating dozens of regional debit-routing networks and rapidly moving the debit-routing market towards a duopoly,” the letter notes. “The routing provision of the debit reforms passed in 2010 [has] spurred networks to compete with one another, prompting networks to innovate. Because of these reforms, debit networks have competed extensively to better secure their payments, providing significant benefits throughout the payments chain.”
Retailers have saved billions of dollars since the passage of the Durbin Amendment, which has allowed supermarkets to maintain level prices on goods, according to economist Robert Shapiro. Additionally, the amendment has supported more than 37,000 jobs over the past five years and saved consumers nearly $6 billion after the first year since implementation, due to products being offered at lower prices as a result of reduced interchange fees.
“While banks and financial institutions enjoy a hefty 25 percent profit margin and earn nearly $79 billion each year in swipe fees, independent supermarkets operate on the 1-to-2 percent profit margin annually while continuing to offer the lowest possible prices in a highly competitive market,” said Greg Ferrara, SVP government relations and public affairs at the Arlington, Va.-based National Grocers Association. “Congress should be protecting Main Street grocers from the price gouging that’s historically taken place, not enshrining it into the law.”
Read the full letter here.