What’s Next With Swipe Fees?

“Since credit cards were introduced more than 60 years ago, no one dared step in to challenge the powerful banks. We did. And we got change,” said NACS President and CEO Hank Armour in his Opening General Session address on Oct. 6 at the NACS Show.

NACS’ “audacious goal” to fight swipe fees, said Armour, “was a moment our industry has been waiting for—and fighting for—for close to a decade.”

On July 21, President Barack Obama signed into law a comprehensive financial services reform bill – a new law that contains debit card swipe fee reforms that NACS and its members called on Congress to support.

The reforms ushered under the new law will have both immediate and longer-term benefits to convenience and petroleum retailers:

-Retailers immediately can discount for different methods of payment, and it in many different ways, whether it be cents off per gallon, fixed amount per transaction, percent discount of the transaction or loyalty points for certain types of transactions.

- Retailers immediately can set a minimum transaction level, not to exceed $10, for credit card transactions to help offset fixed transaction fees.

-By May 2011 – and probably sooner than that, the Federal Reserve must issue standards for card issuers to adopt debit swipe fees that are reasonable and proportional to the cost of the transaction. Within 90 days after that, the card companies must adjust their fees. “We expect rates to be simplified and fees to be significantly reduced,” said Armour.

-The Fed must also write rules implementing non-exclusivity of debit networks, meaning debit card issuers must offer retailers at least two networks to process transactions. “This should introduce some badly needed competition and further reduce fees,” said Armour.

Armour praised the industry’s massive, history-making grassroots push to bring debit card relief to Congress through in-store petition campaigns, phone calls, meetings with representatives and senators and testimony before House and Senate committees on the devastating impact swipe fees have on the industry.

“It was our strong sense of purpose, our perseverance and our people that led to our success. Your P&Ls clearly showed that swipe fees were a major problem and that this was a battle worth fighting,” said Armour. “We demonstrated the severity of the problem and put a glaring spot light on the anti-competitive practices of Visa, MasterCard and the issuing banks.”

However, Armour stressed, the war to bring swipe fee relief across the board and fix a broken and monopolistic system is not over.

Armour said that while victory has been won on one front, this is a war with multiple fronts. The battle continues with NACS urging the Department of Justice to file an antitrust lawsuit challenging some of Visa and MasterCard’s most egregious operating rules.

“Clearly, they were listening,” said Armour. “Two days ago they filed their own lawsuit against the card companies. In response Visa and MasterCard have entered a consent decree to allow retailers to change different prices for different card brands.”

This means that retailers will be able to charge differently for Visa transactions versus MasterCard transactions – and differently for different types of reward cards within brands.

“This is a huge victory, and should introduce true market competition for the first time in credit card history,” said Armour, adding that NACS will provide a comprehensive update as soon as the NACS Show is over.

NACS also is continuing to press forward with its own antitrust litigation against Visa, MasterCard and the eight largest issuing banks. And after the November midterm elections, NACS will continue urging Congress to reform credit card swipe fees.

Armour also shared video greetings from three legislative champions on the issue – Sen. Richard Durbin (D-IL) and Reps. Peter Welch (I-VT) and Bill Shuster (R-PA) – who urged attendees to stay engaged with grassroots advocacy, whether on this issue or a host of others the industry faces.

“I want to be very clear on this. We won a very important battle – an historic battle. But the war is not over,” said Armour. We need to make sure that this legislation means real change. That requires working with the Federal Reserve to insure that the standards will produce a significant reduction in debit fees.”

“The banks will fight us every step of the way and pull every trick in the book,” said Armour. “That’s why our work is not done, and why we need your continued support.”

The NACS Show, which runs through Friday at the Georgia World Congress Center, is ranked as one of the 50 largest annual tradeshows in the U.S.

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