For years, the U.S. has been plagued by excessive debit card swipe fees that hurt small businesses and drive up prices for consumers. These are the charges levied by Wall Street banks and credit card giants against retailers every time a customer pays for a product or service using plastic. Two companies - Visa and MasterCard – essentially have a monopoly and control these fees, which results in driving prices up. In fact, over the last 10 years swipe fees have risen by more than 300 percent, even steadily rising at the height of the recession when Main Street was struggling just to get by.
The Federal Reserve recently found that the cost to process a debit card transaction today is four cents, but the banks and credit card companies charge retailers an average of 44 cents per transaction - racking up more than a billion dollars a month to pay for rewards programs, profits for credit card companies and banks, and bloated salaries and bonuses for Wall Street executives. For small business owners like me, this ‘excess’ is my third highest expense, following labor and property costs, and stands in the way of expanding my business, offering better pay to employees, and passing savings on to customers.
Unquestionably, the current system is broken, and Congress recognized this last year when they took critical steps to repair the system and overwhelmingly passed reforms that would protect small businesses and consumers by reigning in excessive swipe fees associated with debit card transactions.
However, just months before the bipartisan reforms passed last year are set to take effect, the same Wall Street banks and credit card giants that taxpayers bailed out just a few years back have launched an all out attack on bipartisan provisions of the Dodd-Frank Act that reform the debit card swipe fee system.
Proposed legislation would delay implementation of reform to allow time to “study” swipe fees and re-write proposed rules that would reduce debit card swipe fees.
There are a couple of serious problems with this:
First, proposed legislation in both the House and the Senate asks for time to study swipe fees before rules are implemented - well, this has already been done. As part of the Credit CARD Act of 2009, Congress called on the nonpartisan Government Accountability Office (GAO) to study the effects swipe fees have on the market. The GAO’s final report raised concerns that Visa and MasterCard’s market power led to irrationally high fees and that reducing swipe fees would lower consumer prices.
Second, delaying or repealing these reforms is the equivalent of a second bailout of the very same banks that got us into this financial mess. The fact that they can go on record threatening higher ATM fees for consumers if debit card swipe fee reforms are enacted as passed, while concurrently working deals to fatten their wallets demonstrate that these Wall Street fat cats will stop at nothing to retain their perks and profits.
On July 21, 2010, I was honored to be in attendance when President Obama signed into law the Wall Street Reform and Consumer Protection Act. When he did so he said, ‘unless your business model depends on cutting corners or bilking your customers, you’ve got nothing to fear from reform.’ Well, I can assure you that Main Street isn’t afraid of reform. Clearly it’s a different story on Wall Street.
Members of Congress need to do what’s right and stand up to the special interests and support small businesses. Our economy won’t grow because of greater investments in K Street, it will grow with more investment on Main Street.
Dennis Lane is a single store 7-Eleven Franchise owner and the national spokesman for Reform Swipe Fees NOW! Mr. Lane has owned and operated his store in Quincy, MA for 36 years.