NRF: Further Federal Action Needed to Control Swipe Fees

The National Retail Federation (NRF) said a new Federal Reserve study showing credit card swipe fees result in a “transfer of income” from low-income individuals to wealthy individuals is evidence of the need for further federal action to control the fees, according to a report by PYMNTS.com.

“This report confirms what we’ve always known -- that swipe fees drive up costs for all consumers, and that struggling moderate and low-income consumers who often are unable to take advantage of card perks or who don’t have a credit card at all end up subsidizing the wealthier individuals who do,” NRF SVP and general counsel Mallory Duncan said in the report. “This also shows the importance of the new law allowing retailers to give a discount to customers who don’t use credit cards. But the report recognizes that the real solution won’t come until there is genuine consumer transparency and competition that lowers credit cards fees to a point that reflects banks’ actual costs for processing these transactions.”

The report, issued by the Federal Reserve Bank of Boston last week, found that the typical consumer “is largely unaware of the full ramifications of paying for goods and services by credit card,” according to PYMNTS.com. While swipe fees drive up prices for all consumers, an estimated $151 of the extra amount paid by the average cash-using household goes to subsidize card-using households, the report noted.

Additionally, the report was issued less than a week after President Obama signed financial services reform legislation that included provisions to address credit and debit card fees. Federal law may allow retailers to give a discount for cash or checks, but the card industry rules and practices made discounts difficult.

The new law bars the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit cards, and gives the Federal Reserve nine months to set regulations resulting in “reasonable and proportional” swipe fees for debit cards. It also allows merchants to set minimum purchase amounts of up to $10 for credit cards, according to the report.

In other swipe fees news, Food Marketing Institute applauded the news that the Department of Justice was mulling whether to file a civil lawsuit challenging rules prohibiting surcharges on credit and differential discounts between networks. “This is yet another positive development for supermarket retailers and their customers, noted FMI president and CEO Leslie G. Sarasin. “FMI has been trying for years to get some kind of relief from these oppressive swipe fees. Both of these reforms have also been introduced in Congress in legislation filed by Rep. Peter Welch, D-Vt., and are also the subject of litigation filed in 2005 by a number of retailers against Visa and MasterCard.”

Also currently on lawmakers’ agendas is organized retail crime (ORC). Late last week, Rep. Bobby Scott, D-Va., Chairman of House Judiciary, Subcommittee on Crime, Terrorism and Homeland Security, introduced the Organized Retail Theft Investigation and Prosecution Act of 2010, which would establish an Organized Retail Theft Investigation and Prosecution Unit (ORTIP Unit), made up of investigators, prosecutors and other personnel dedicated to investigating and prosecuting large-scale retail theft and assisting state and local law enforcement and prosecuting agencies.

Industry groups such as the Arlington, Va.-based Retail Industry Leaders Association (RILA) hailed the proposed legislation as “an important first step,” while Washington-based NRF was equally encouraged: “Coupled with existing programs at the local, state and federal levels, this bill is one of the keys to protecting both retailers and consumers against the massive economic costs and very real public health and safety risks posed by these crimes,” noted NRF senior asset protection advisor Joe LaRocca.

SOURCE: Convenience Store News