Consumer and Merchant Groups Urge Senate to Reject Bill Delaying Fed Action on Debit Card Swipe Fees

Contact: J. Craig Shearman
(202) 257-3678

WASHINGTON, June 24, 2024 – More than 200 state and national organizations representing consumers and merchants today called on the Senate to reject legislation that would delay the Federal Reserve’s proposal to reduce how much big banks are allowed to charge to process debit card transactions.

“Every day of further delay in the Fed’s consideration of its proposed rule means another day in which large card-issuing banks are deducting significantly more money out of debit transactions than is reasonable, proportional, or allowable under the law Congress passed,” the groups said. “That is why financial industry trade associations are seeking to delay the Fed as long as possible from taking action to update its 2011 regulation – delay preserves what for them is an enormously lucrative status quo.”

Action is needed because debit card swipe fees have stayed the same for over a dozen years despite banks’ falling costs and “impose enormous costs upon American merchants and inflate retail prices paid by American consumers,” the groups said.

The comments came in a letter signed by 218 groups ranging from consumer advocates to retail trade associations sent to members of the Senate this morning. Signers included the Merchants Payments Coalition and other national organizations along with state groups from every state plus Puerto Rico.

The letter comes in response to S. 4570, the Secure Payments Act, which was introduced last week by Senator Ted Budd, R-N.C., with Senators Thom Tillis, R-N.C.; Steve Daines, R-Mont.; Bill Hagerty, R-Tenn., and Katie Britt, R-Ala., as cosponsors. Similar to legislation introduced in the House in March by Representative Blaine Luetkemeyer, R-Mo.,  the bill would require the Fed to conduct an in-depth analysis of the impact of the proposal and issue a report to Congress before it could be enacted.

The letter noted that the original February deadline for public comments on the proposal was delayed by 90 days at the request of the banking industry.

“There was ample time for any and all stakeholders to submit information and views to the Fed during the comment period and the Fed must and will take those comments under consideration,” the letter said. Budd’s bill would require a “second, duplicative study” of issues already raised in the comment process and “is a transparent effort to further delay what the Fed has identified as necessary revisions.”

Under regulations established in 2011, banks that have at least $10 billion in assets and follow rates centrally set by Visa and Mastercard can charge merchants swipe fees of no more than 21 cents per debit card transaction plus 1 cent for fraud prevention and 0.05% of the transaction amount for fraud loss recovery. A Fed proposal released last fall would lower the base amount to 14.4 cents and the amount for fraud loss to 0.04% but would increase the amount for fraud prevention to 1.3 cents. Going forward, the rate would be automatically updated every other year based on banks’ costs.

While merchants don’t want action on the proposal delayed, MPC said this May that it
doesn’t go far enough. That’s because it would lower the amount banks can charge by less than a third even though banks’ average cost of processing a transaction has fallen by nearly 50% – from 7.7 cents before the current rate was set to 3.9 cents as of 2021.

The swipe fee regulation and a  provision letting merchants choose which networks process debit transactions have saved an estimated $9 billion a year and studies show about 70% of the savings has been shared with consumers, largely by holding down price increases. Nonetheless, the savings could have been higher had the Fed set a lower rate or adjusted rates to follow banks’ falling costs.

Debit card swipe fees cost merchants and their customers $36.3 billion last year, according to the Nilson Report. When credit cards are included, swipe fees totaled $172 billion in 2023 and have more than doubled over the previous decade. The fees are most merchants’ highest operating cost after labor, driving up consumer prices by over $1,100 a year for the average family.

About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.