DES MOINES, Iowa – When millions of Americans are out of work and businesses struggle to remain viable, it is simply crazy for Congress to pave the way for higher costs to consumers and retailers, and to cut off an avenue to job creation.   

Last year, as part of broader financial reform, Congress voted to limit swipe fees and bring some certainty to the costs associated with those fees.  But the big banks that make a killing under the current system mobilized against the change.  Now, on the eve of the law’s implementation, big banks, who issue the bulk of America’s debit cards, want Washington to put off the effective date for up to two years.  And, they have pulled out all the stops, including a LOT of mis-information, to “delay” (I would call it KILL) debit card interchange fee reforms.  Sen. Jon Testor is prepared to offer an amendment in the Senate this week that will delay and effectively kill the Durbin Amendment.

We have compiled a list of 14 “Debit Card Fast Facts” to cut through all the mis-information being put out by the banks, credit card companies and credit unions.  You can get them by clicking here.

Debit card interchange fees don’t show up on consumer’s bank statements, but they are embedded in the cost of everything we buy.

When retailers started accepting debit cards in the 1990s, banks actually paid retailers a few cents per transaction. It was more efficient for businesses, customers and naturally the banks since they would have less paper checks and cost savings. In a free market you assumed that with these efficiencies, improvements in technology and increased volume we would see economies of scale and our costs would go down.  But the complete opposite has been true. According to the Federal Reserve Bank of Kansas City, debit card swipe fees have quadrupled since the 1990s, far outstripping price increases for anything I can think of – including gasoline!

Today, debit card swipe fees are one of a retailer’s highest costs, exceeding even healthcare for employees.

Retail is super-competitive and transparent. Gasoline stations post their prices on the corner of the sidewalk for everyone to see, and in the grocery industry, profit margins for the past 50 years have never exceeded two pennies on the dollar. When we see cost increases of the magnitude we have on debit card swipe fees, it impacts our ability to keep prices low for our customers. There is no doubt that in a very competitive and transparent retail environment a reduction in swipe fees will benefit our customers; it’s no different than a reduction in any other operating cost we face.

Lastly, don’t buy into the banks false arguments that merchants receive a payment guarantee when a debit card is swiped in our stores because that is absolutely untrue. In the current system, card networks reserve the right to charge a merchant back for a fraudulent transaction, in which case the merchant is out the sale and merchandise. As a result, merchants are bearing billions of dollars of fraud losses in the system.

The Federal Reserve’s own survey found that merchants bear 43% of all losses, and that number rises to 76% if it’s a transaction at the gas pump or over the Internet, which is known as a card-not-present transaction. Not to mention, our payments system is anything but world class. The June Consumer Reports Magazine compared U.S. payments card technology to non-industrialized countries in western Africa since U.S. financial institutions, and card networks continue to utilize fraud prone 1970’s technology. Why wouldn’t they when merchants are shouldering the majority of fraud in the system?

The fact is that high debit swipe fees resulting from banks’ price-fixing with card networks such as Visa and MasterCard hurt competition, innovation and economies. The delay sought by the major banks to “study” the impact of reform will derail creation of thousands of jobs and cost consumers over $12 billion a year through the continuation of excessive swipe fees.

Again, all of this is ludicrous when our economy remains fragile, with both consumers and retailers fighting to keep their heads above water.  Congress must ignore the big banks’ demands and move ahead now to restore fairness to the debit card fee system.

In the grocery business, the extra burden for swipe fees threatens to eat away at already-small profit margins (which have never exceeded 2 percent over the past 50 years).  That can threaten the very viability of grocer’s operations, endangering the jobs of our employees and the well-being of the families who depend on our workers.  In fact, a two-year delay proposed by Sen. Testor in implementing swipe fee reform would cost more than $24 BILLION and eliminate or prevent creation of almost 200,000 new jobs.

Senators Chuck Grassley and Tom Harkin deserve strong praise for supporting reform last year and for continuing to work to ensure Iowa small businesses and the customers they serve in communities across the state see some relief from growing debit card swipes.  Call and thank them for supporting Iowa consumers!

There is nothing wrong with paying a fair fee for a service, but on the issue of debit card swipe fees, many American banks are just being greedy.  It’s time to rein them in.

For additional information, or to schedule a time to speak with IGIA President Jerry Fleagle, please contact IGIA Communiciations Specialist Jordan Williams at 515-270-2628.