Restaurant Industry Groups Support Cap on Debit Card Fees

The fees associated with debit and credit cards can make a significant cut in retailers’ bottom line.  Retailers have been on the steps of Congress asking that for a limit on these fees for years.  Their pleas never got anywhere with Congress, until now.

What used retailers once thought were exorbitant fees is all changing.  Congress had 64 Senate votes that included 17 Republicans for price control on debit transactions in spite of a loud plea of objections from the banking industry.

Restaurant and retail groups offered their support for the new amendment involving financial service reform legislation that would limit the fees financial companies can charge on debit transactions.

What is a Reasonable Debit Fee Transaction?

The legislation, introduced by Senator Richard Durbin, D-Ill., authorizes the Federal Reserve to determine what is reasonable and in proportion for charges related to debit cards and fees imposed on restaurants and other businesses.
The amendment was approved by a vote of 64 to 33, and also would allow operators to establish a set of minimum and maximum transaction levels for credit cards, and offer discounts to customers if they pay their bill with cash, check, or debit card.

Under existing regulations, operators cannot set transaction levels, despite the fact they can lose money on small charges or debit transactions.

48 Billion in Interchange Fees Paid by Restaurant Industry

Interchange fees are said to be one of a restaurant’s biggest expenses. Scott DeFife, the National Restaurant Association’s executive vice president for policy and government affairs said, “Merchants pay about 48 billion in interchange fees every year.”

DeFife went on to say, Interchange fees, also known as “swipe fees,” and related contractual restrictions benefit credit card companies and card-issuing banks at the expense of merchants and consumers.

Proposal Allows Retailers to Offer Incentives to Different Types of Payments

The proposal also would permit merchants to set minimum and maximum transaction levels for credit cards. As a result, retailers would be free to choose their payment methods. Under current rules, merchants that accept credit or debit cards cannot set minimum transaction levels, although they sometimes lose money on small charge or debit transactions.

Additionally, the amendment would increase competition and allow businesses to offer discounts to customers who pay with cash, checks, PIN debit, and so on, which carry lower rates than credit cards.

The amendment is attached to the Restoring American Financial Stability Act of 2010.

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