RILA to Fed: Lower Debit Swipe Fee Rate Now
In response to the Federal Reserve’s recent biennial report on fees charged or received by debit card issuers and payment card networks, which revealed that while retailers’ costs have remained fixed at the 21 cents plus five basis points cap set by the board in 2011, banks’ cost has dropped by more than half, to 3.6 cents, the Retail Industry Leaders Association (RILA) responded that the Fed needs to reduce the swipe-fee rate now.
The retail industry has contended ever since the Fed imposed the cap that it was inconsistent with the underlying law’s requirement that retailer fees be “reasonable and proportionate” to the cost of processing the transaction. The board also found that banks collected more than $20 billion in debit swipe fees in 2018 alone.
“The Federal Reserve’s data confirms that it is long past time for the Federal Reserve to lower the base interchange rate of 21 cents to reflect the current reality in today’s payment ecosystem,” noted Austen Jensen, SVP of government affairs at Arlington, Va.-based RILA “The 580 percent markup that Wells Fargo and other Wall Street banks charge merchants is neither ‘reasonable’ nor ‘proportionate’ to the cost of the transaction. The problems with the implementation of the reforms are made worse by the fact that large banks have refused to enable routing competition for ecommerce transactions, a requirement under the law. It is time for the Federal Reserve to abide by congressional intent and update their policies surrounding these pro-competitive reforms to reflect the market in 2019.”
RILA members encompass more than 200 retailers, product manufacturers, and service suppliers, which together account for 100,000-plus stores, manufacturing facilities and distribution centers domestically and abroad.