The truth about debit-swipe fee protections: everyone wins
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For American small businesses, debit swipe-fee protections enacted in 2010 have brought competition and fairness where there was none before. Menu prices have remained stable for consumers even though food and labor costs — the top two line items accounting for more than two-thirds of restaurant expenses — have risen sharply in recent years.

Unfortunately, an organization called the Electronic Payments Coalition is spending big bucks to repeal these protections and put billions more in the pockets of Wall Street fat cats. In a recent op-ed in The Hill, the group levied baseless attacks against these much-needed protections in an attempt to encourage Congress to put a multibillion-dollar tax on American consumers that would directly benefit the country’s biggest banks.


For starters, their claim that restaurants and other small businesses have “pocketed” the savings from these critical debit swipe-fee protections doesn’t stand up at all. In reality, a study by economist Robert J. Shapiro proves that the debit-swipe protections have passed along more than $5.8 billion in savings to consumers, while creating 37,000 jobs in the first year alone.


The banking industry has alleged that the Durbin amendment, which caps debit card processing fees, has decreased consumer access to free checking. However, in fact, their own trade association, the American Bankers Association, found that more Americans have free checking today than before 2010. Clearly, big banks are hoping American consumers don’t read that.

But consumers aren’t the only ones who are profiting from the 2010 debit-swipe fee protections. Since the protections were put in place, American banks have seen their profits and stock prices soar. Community banks’ fourth-quarter net income rose 10.5 percent in 2016. The nation’s biggest banks are also seeing record profits, with bank stocks outperforming broader stock markets since the presidential election in November 2016. The nation’s six largest banks saw an additional $280 billion in combined market value.

Wells Fargo is one of the largest debit-card issuers in the country and a bank that stands to make millions, if not billions, if these protections are repealed. Just this month it was announced Wells Fargo CEO Timothy Sloan was awarded a $12.8 million raise “for his work last year.” However, Sloan only served as CEO for three months, after replacing the previous Wells Fargo CEO who was fired after it was revealed the bank had defrauded millions of customers.

The bank also plans to hold its annual meeting at a resort that “offers the kinds of amenities you’d expect from a swanky venue overlooking the Atlantic coast: two championship golf courses, villas with private balconies, therapy baths and massage lessons.” I doubt the customers who were defrauded will be invited to participate. Clearly, debit-swipe fee protections have not hurt banks’ bottom lines.

All the while, costs for restaurants are rising while menu prices have barely changed. According to the Bureau of Labor Statistics, average food costs increased 12 percent between 2010 and 2016, while restaurant labor costs jumped 19 percent. At the same time, menu prices rose at an average annual rate of only 2.5 percent during this six-year period. This is nearly 40 percent below the 4.1 percent long-term average annual growth rate in menu prices.

In other words, even though costs are rising significantly for restaurants, those costs are not being passed along to consumers — thanks at least in part to debit swipe-fee protections. Debit swipe-fee protections help small businesses, put money back into the pockets of American consumers, allows for even more free checking, and banks are still able to afford for their swanky vacations. In other words, it’s a win-win for everyone.

Yet the Electronic Payments Coalition and its big bank backers are spending millions to repeal it. Why? To take even more money from American consumers and small businesses. Someone needs to tell them Gordon Gekko wasn’t the hero.

Leslie Shedd is Vice President of Communications at the National Restaurant Association.

The views expressed by contributors are their own and are not the views of The Hill.