WASHINGTON, D.C. -- As the U.S House and Senate were poised to vote on the massive financial reform bill that includes the retailer-supported Durbin Amendment, which would direct the Federal Reserve to issue rules to ensure that debit card swipe fees are reasonable and proportional to the processing costs incurred, NACS is urging retailers to call their members of Congress immediately to weigh in.
This week's expected votes culminate a nearly decade-long battle by retailers to address the issue, according to the c-store industry's largest association, and the outcome is still very uncertain.
"We all know how hard we, the state associations, grass roots organizations and other industries involved in the Merchants Payment Coalition have worked," said Lyle Beckwith, NACS senior vice president of government relations. "Since Durbin's amendment passed the Senate on May 13, there's been a lot of premature celebrating [by some] and the fight has gotten more and more intense. Every time we clear a hurdle there has been more erroneously reporting in the main stream media about what is going on."
Although a great deal of progress has been made, culminating in the marathon conference committee session leaving the interchange fee language intact, media outlets saying, "Retailers have won" are not accurate, Beckwith said.
"We haven't won anything yet. Winning will be when debit interchange rates are lowered. We remain vigilant and our charge is to get the underlying financial reform bill enacted," he explained.
With the vote in the Senate and House "razor thin," the death of Sen. Byrd and public statement by Sen. Brown he will not support the legislation with a $19 billion tax on banks included, the reform -- and with it the interchange rate regulation -- is on shaky ground. The House and Senate conference committee re-adjourned Tuesday afternoon to renegotiate in hopes of getting Sen. Brown's support.
"It is essential our members make one final push to their House and Senate members to vote for the bill based on the inclusion of the Durbin Amendment," Beckwith said. "We are still engaged in a heavy battle. If we don't make a big push at the end, we could still lose this. The banks and the credit card companies have not given up trying to kill this bill."
NACS had not weighed in on the financial reform bill until the Durbin Amendment was added. Now it is strongly supporting it. NACS and other members of the Merchants Payment Coalition are running ads supporting swipe-fee regulation, targeting specific districts and Congress members.
Even if enacted, the industry must still go before Congress to argue what "fair and reasonable" rates would be.
As it stands, the Durbin amendment has been modified from its original language. Among the changes, according to NACS counsel Doug Kantor:
-- An exemption to federal rules for banks or credit unions with less than $10 billion in assets remains, but additional exemptions have been added. They include government program cards, whether debit or prepaid, and private prepaid cards.
-- A provision in the Senate language allows merchants to offer discounts based on the credit card network used was removed. Under the old language, for instance, if Discover card was less expensive to process, retailers could give customers using that card a discount. In its place is a provision that prevents Visa or MasterCard from limiting the number of networks over which a debit transaction can be processed to only their own networks. "There must be competition," Kantor said.
-- Language was added to clarify when retailers may give a discount based on form of payment. While retailers may offer discounts based on cash, debit or other form of payment, they may not offer a discount based on the credit card network used in the transaction or a specific card-issuing bank.
-- Under the new language, merchants may set minimum amounts on credit card transactions, but the minimum must be $10 or less. Merchants would not be able to set maximums; only the government or universities would be allowed to do that.
-- Banks can apply to the government for special dispensation allowing them to change their interchange rates, depending on their spending on fraud prevention, if they show that spending is actually preventing fraud, is efficient and cost-effective.
"There is a great need for our industry to speak up, not just for this vote, but to make the Durbin Amendment a net positive, rather than a net negative, for [passing] this bill," Beckwith said. "It is important for this bill, future bills and for the credibility of our industry."
As for the banks saying contending retailers would not pass on any reductions in fees to the consumer in form of lower product or services costs, Beckwith said: "Where do the banks come off saying retailers won't pass the savings on to consumers, so we're keeping it all. Why is that an argument?"
NACS spokesperson Jeff Lenard noted the convenience store industry has passed discounts on to consumers, such as when they offer cents off at the pump for customers who pay cash, "when feasible. In a competitive market like ours, when you reduce costs, you reduce price."