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Debit Swipe Fees

By: Brittany Engelmann-- 2017-03-30 6:00 am --

Retailers may be steeling for a fight with banks over rising debit card processing fees, according to a Wall Street Journal report.

Emboldened by a potentially friendlier administration in the White House, banking lobbyists are pushing aggressively for a repeal of a portion of 2010’s Dodd-Frank Wall Street Reform Act known as The Durbin Amendment.

The Durbin Amendment, which went into effect in October 2011, applied caps to interchange fees that banks were allowed to charge merchants on debit card transactions. The act didn’t affect credit card transactions.

Prior to the bill the fees averaged 51 cents per transaction. After Durbin went into effect the fees were capped at 21 cents plus .005 percent of the transaction. In real dollars, banks were able to collect a little more than $20 billion in 2011 before the act and a little more than $16 billion during the same period the following year.

The protections could be in jeopardy.

President Donald Trump has signaled a desire to jettison large parts of the 2010 bill, and many of Trump’s inner-circle and cabinet hail from the banking industry.  Trump recently quipped that there was no one better than JPMorgan Chase CEO Jamie Dimon to tell him about Dodd-Frank, and executives at 18 regional banks signed a letter to the president and members of congress asking them to eliminate this and other provisions, according to Bloomberg News

“No one has comprehensively considered the cumulative impact of regulations implemented in the wake of the financial crisis," the letter said.

Experts believe legislation will come from Representative Jeb Hensarling, (R-Texas). Hensarling wrote the Financial Choices Act that passed through the House Financial Services committee in Congress, and included language about the Durbin Act. It’s not clear if that language will come through on the final bill but Hensarling said in January that fee caps were "an important part of this bill. As a matter of principle, Republicans do not believe in federal price controls."

Hensarling and others are working on a new version of the Choices Act that they say will be ready soon.

Even with strong headwinds, retail interest groups say they won’t allow the repeal of the amendment, which would be tantamount to an across the board fee hike, without a fight. 

"We will be putting up a big fight," Laura Knapp Chadwick, director of commerce and entrepreneurship policy for the National Restaurant Association told the Journal. "We're hoping it doesn't get ugly on the House floor, but we are preparing to go down that route."

What’s it all mean for retailers?

Some reports suggest that the retail industry saved more than $8 billion year over year, but there are conflicting reports about what merchants did with that savings, some say they passed the savings along to consumers while others say they invested in better customer service.

Should the repeal happen, retailers will need to make choices in those areas and decide if they’ll skimp on customer service or perhaps pass along the fee burden to their customers.