John Furner President and CEO | Official website
The National Retail Federation (NRF) has expressed its concerns to the Federal Reserve regarding the proposed changes to the 13-year-old cap on debit card "swipe" fees. While the NRF welcomes the move to lower the cap, it argues that a proposed change in methodology would result in an excessively high cap.
In a letter to the Fed's Board of Governors, NRF Chief Administrative Officer and General Counsel Stephanie Martz stated, “We are very appreciative that the board has undertaken to update the interchange rate so that it will no longer depend on data that is now 15 years old.” She added that while an update was overdue, the new method of calculating the cap would negatively impact merchants and consumers and fail to accommodate future developments in the rapidly evolving payments industry.
The current cap of 21 cents per transaction was established in 2011 following complaints from merchants about high debit card swipe fees. The Durbin Amendment, a law passed by Congress in 2010, directed the Fed to ensure these fees were "reasonable" and "proportional" to banks' costs. This cap applies only to cards issued by banks with assets exceeding $10 billion.
The implementation of this cap resulted in an estimated annual saving of $9 billion for retailers, with studies indicating that at least 70% of these savings were passed onto customers. However, debit and credit card swipe fees reached a record $172.05 billion in 2023, contributing to increased consumer prices.
The proposal under consideration would lower the cap to 14.4 cents per transaction based on research showing that banks' average cost had fallen to 3.9 cents as of 2021. However, Martz argued that this change would increase profit margins for large issuers rather than reducing banks' profits from debit card swipe fees.
Martz suggested maintaining the cap at 2.7 times banks' average cost or setting tiered rates based on banks' debit card transaction volume. She also called for the elimination of the additional 1 cent charge for fraud prevention, arguing that it was no longer justified after the adoption of EMV chip cards in 2015.
The NRF has been advocating for fair credit and debit card swipe fees for over two decades. Martz stressed the need for banks to substantiate their cost calculations and suggested they be audited by an independent party to ensure accuracy.
