The National Retail Federation will launch a massive campaign aimed at preserving interchange fee cap rules that, if enforced this July, would limit the amount of interchange fees the nation’s largest banks are able to charge merchants per debit card transaction by as much as 70% of their current levels.
Today the NRF, the world’s largest retail trade association, began a 60-day advocacy campaign aimed at ensuring interchange fee cap take effect on July 21 as scheduled. The campaign is will leverage social media platforms, print and radio advertising and a new web resource to promote action by both consumers and retailers. The NRF also says it will state a fly in this coming June so that its membership can meet with Congress in addition to other activities.
“This campaign is going to show that retailers are willing to stand up for their customers and fight to keep the big Wall Street banks from putting their hands into consumers’ wallets every time a card is swiped to pay for a purchase” said NRF Senior Vice President and General Counsel Mallory Duncan in a statement released this past Wednesday. “Most consumers don’t even know these fees exist, but they are costing the average family hundreds of dollars each year and our economy billions of dollars.”
If enforced, interchange fee cap rules would limit the amount of interchange fees banks with assets of $10 billion or more can charge merchants to no more than 12 cents per transaction. According to the NRF, interchange fees have almost tripled since 2001 and currently cost the average American household roughly $427 annually.
Swipe Fee Cap Rules Run Into Opposition:
Opponents of the Durbin Amendment say interchange fees allow banks to fund initiatives like fraud prevention and mitigation programs or debit rewards programs. Earlier this year, Montana Senator John Tester proposed the Debit Interchange Fee Study Act, which calls for a 15-month delay in the rules enforcement and a 12-month study of the rule just prior to it enactment. Tester’s original rule had originally called for a two-year delay of the Durbin Amendment, but was amended this past Wednesday so that it could gain more support in the Senate.
More recently, fraud issues with both arts and crafts retailers Michaels Stores Inc. and electronics manufacturer Sony Inc. have strengthened the case against interchange fee cap since banks have argued they must absorb all of the costs for resolving fraud-related debit card issues. In response, the NRF has argued that most fraud costs are actually paid by retailers when banks issue a “chargeback” against fraudulent purchases.
Other opponents of the Durbin Amendment say U.S. banks should replace magnetic strip credit cards with smart cards that use small microprocessing chips, or EMV chips. According to the Smart Card Alliance, prevalent use of smart cards in other global markets like Canada, Latin America and Europe have resulted in decreased incidences of fraud. While the U.S. financial services industry has been slow to incorporate EMV technology due to its costs and the nation’s relatively low fraud rate, the threat of interchange fee caps could force the nation’s largest banks to change their tunes.
The NRF has members in 45 countries, including 1.6 million American companies that employ almost 25 million workers.
Check out the video below to hear more of Duncan’s views on interchange fee reform: