The efforts by retailers to encourage the Fed to lower debit card user fees being charged by banks for a second time in less then a year has brought a swift response from the banking industry. An article by Edward Wyatt in the New York Times discusses the retailers efforts and the push back from the banking industry.
Retailers argued that the Fed’s recently imposed fee structure doesn’t go far enough to limit debit card fees and allow the banks to capture too much money from debit card transactions, and have filed a lawsuit against the Fed.
“Mallory Duncan, senior vice president and general counsel for the National Retail Federation, said in an interview that the main problem with the Fed’s new fee structure was that it allowed banks and card companies to add up to 5 basis points — or five one-hundredths of a percentage point — to each transaction to recover a portion of fraud losses. “The law specifically said that they could recover fraud prevention costs,” but it does not allow for the recouping of actual losses, Mr. Duncan said.
Banks can also include in their fees the cost of updates to their processing equipment, he said. That benefits the overall operations of banks and card companies, Mr. Duncan said, but does not directly relate to specific debit card transactions, as the law requires.
“The Fed did a very credible job of investigating what the incremental costs of debit card transactions were,” Mr. Duncan said. “But the Fed didn’t follow the law, so everyone’s fees are higher than they should be.”
Representatives from the electronic payment industry have argued in response to these efforts that retailers are attempting to use government power at a time when banks are unpopular to bring down their cost of doing business. Retailers are the main beneficiary of these new caps; consumers see little benefit; retail prices haven’t dropped.
“Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents card companies, banks and other issuers of debit cards, said the lawsuit by retailers was “a matter of greed.”
“Retailers won’t be truly happy until they pay zero to accept cards,” Ms. Wexler said. “They don’t want to pay anything for this system, which produces for them more revenues, more customers and more security.”