Let’s Bring Back Cash…

Independent grocers were once again screwed by the Fed, which was pushed by the big banks to set debit swipe fees to almost double what it proposed in December, and will in turn prolong the struggle for small businesses to bring parity to the debit card market and ultimately prevent the intended relief from reaching merchants and consumers.

Leaders from the National Grocers Association (N.G.A.) were outraged by the ruling, as evidenced in their remarks that described how “the nation’s largest banks succeeded in pressuring the Federal Reserve in its final swipe fee rule to increase the allowable debit swipe fees to over 21 cents, up from the proposed fees of 7 to 12 cents.” The increase in the allowable debit swipe fees charged by the largest banks with assets over $10 billion does not follow the law and provides little benefit for Main Street independent grocers and consumers, said Peter J. Larkin, N.G.A.’s president/CEO, who noted that the rule does little to level the playing field and will actually perpetuate the anticompetitive actions of the big banks.

"Every month the largest banks and credit card companies reap over $1 billion a month in debit swipe fees off the backs of Main Street businesses and consumers,” said Larkin. “It's extremely unfortunate that the Federal Reserve ceded to the bank's lobbying to increase the allowable debit swipe fees. Independent grocers and our customers are very disappointed that they will not benefit from the important reforms Congress intended. We fought for years to persuade Congress to reform debit interchange and we finally succeeded. This afternoon the Federal Reserve reversed our victory and every independent grocer in American has a right to be angry and disappointed.”

Indeed, according to the Sunlight Foundation, a nonprofit government watchdog, during the first two months of 2011 groups associated with a coalition opposing the implementation of new rules for debit “interchange” fees had contributed more than $500,000 in political action committee money to dozens of lawmakers, including those supporting backers of a bill that would delay the rules from going into effect.

Christopher Coborn, president/CEO of Coborn’s, Inc. and chairman of N.G.A., echoed Larkin and Sarasin’s profound disappointment. “Retail grocers and other merchants have been fighting for over a decade to reform swipe fees and the anticompetitive rates and rules imposed on merchants. With the release of this final rule it is clear that the Federal Reserve failed in its responsibility to consumers, unlike in other countries where real reforms have been enacted and enforced.”

Sandy Kennedy, president of the Retail Industry Leaders Association (RILA), also weighed in by likening the Federal Reserve’s “about-face” with “[abandoning] the facts that [it] embraced in the December proposed rules, instead ceding to the wishes of the big banks and credit card companies.”

Data released by the Federal Reserve in December showed that although merchants paid on average 44 cents on every debit transaction, the transaction cost just 4 cents to process. By comparison, paper checks have been processed without any interchange fee for nearly a century.

“The Federal Reserve today has badly damaged its credibility,” said Kennedy, who pledged that the merchant community “will explore its options to implement the debit interchange relief that Congress intended.”

We’d like to hear your thoughts about the Fed’s ruling. You can share your comments in the Discussion Forum section of the Independent Grocer Network.