About the issue
The U.S. Senate voted this week to allow the Federal Reserve to set limits on debit-card transaction costs — “swipe fees” — that financial institutions charge retailers. Current fees typically are 1-2 percent per purchase, according to the Federal Reserve, though some Springfield merchants say fees sometimes approach 3 percent.
What’s next
The Federal Reserve is expected to issue new rules by July 21.
***
Local retailers say they welcome U.S. Senate action this week to limit fees financial institutions charge merchants for debit-card transactions.
The president of the Community Bankers Association of Illinois, however, said the issue probably will be settled in court.
The Senate vote allows the Federal Reserve to set new rules by July 21.
Springfield retailers said debit-card transaction fees, or “swipe fees,” range from 1 percent to nearly 3 percent per purchase, depending on the issuer and type of transaction.
The Food Mart grocery and deli recently set a $5 minimum purchase on Visa debit-card purchases to help cover transaction costs, said co-owner Tony Pirrera. He added that he is not yet certain the congressional action would provide relief for retailers or consumers.
“They’ve made it so complicated. Who knows what kind of charges they’re going to come out with next?” said Pirrera.
The Federal Reserve proposed last fall a flat, 12-cents-per-transaction limit on major banks, but Community Bankers Association president Robert Wingert said fee limits will hurt smaller banks and consumers.
“A lot of the merchants are dealing with debit cards that come from the big banks,” said Wingert. “If you limit it to 12 cents per transaction, merchants naturally are going to drive debit-card business to the big banks.”
Wingert said it costs financial institutions to issue the cards, and banks are liable for losses resulting from fraud.
“Fraud losses are real, and they are meaningful,” said Wingert, who added that he expects there will be a court challenge once the new rules come out.
The president of Community Bank Service Corp., a state association subsidiary that handles financial services for members, said the group has asked Visa and MasterCard to consider shifting more of the fraud-loss risk to merchants.
“What it (12 cents) covers is processing costs. What it doesn’t cover is the cost of the plastic, the cost of fraud and other costs,” said Mike Kelley.
Community banks will either lose money or be forced to raise other consumer fees to compensate if the new limits are implemented.
“Costs would be shifted elsewhere,” said Kelley.
During an appearance Friday at the Trout Lily Cafe in downtown Springfield, U.S. Sen. Dick Durbin, D-Ill., a leading Senate supporter of the limits, said Chase Bank, Bank of America and Wells Fargo alone make approximately $8 billion a year from debit-card transactions.
He noted that the average U.S. fee of 44 cents for Visa and MasterCard transactions compares with just 9 cents in Europe.
“What we’re doing is calling on the Federal Reserve to issue this rule as quickly as possible, so that businesses across America know what the rules will be from this point forward,” Durbin said.
Cafe owner Kate Hawkes said that, by the time she subtracts transaction fees and other costs, she probably loses money on some debit-card sales.
“We have tourists coming through all the time, and the debit cards are killing us,” said Hawkes. “We have a sign on our cash register sometimes that says cash is cheerfully accepted.”
Motorists may already have benefited from the swipe-card controversy, said Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association, which represents the state’s convenience-store industry.
Fleischli said some stations have started giving discounts of 5 cents a gallon when motorists pay cash.
“They are trying to avoid that (fee) cost,” said Fleischli. “It gives the people a savings if they use cash, and it helps the marketers, too.”
The U.S. Senate voted this week to allow the Federal Reserve to set limits on debit-card transaction costs — “swipe fees” — that financial institutions charge retailers. Current fees typically are 1-2 percent per purchase, according to the Federal Reserve, though some Springfield merchants say fees sometimes approach 3 percent.
What’s next
The Federal Reserve is expected to issue new rules by July 21.
***
Local retailers say they welcome U.S. Senate action this week to limit fees financial institutions charge merchants for debit-card transactions.
The president of the Community Bankers Association of Illinois, however, said the issue probably will be settled in court.
The Senate vote allows the Federal Reserve to set new rules by July 21.
Springfield retailers said debit-card transaction fees, or “swipe fees,” range from 1 percent to nearly 3 percent per purchase, depending on the issuer and type of transaction.
The Food Mart grocery and deli recently set a $5 minimum purchase on Visa debit-card purchases to help cover transaction costs, said co-owner Tony Pirrera. He added that he is not yet certain the congressional action would provide relief for retailers or consumers.
“They’ve made it so complicated. Who knows what kind of charges they’re going to come out with next?” said Pirrera.
The Federal Reserve proposed last fall a flat, 12-cents-per-transaction limit on major banks, but Community Bankers Association president Robert Wingert said fee limits will hurt smaller banks and consumers.
“A lot of the merchants are dealing with debit cards that come from the big banks,” said Wingert. “If you limit it to 12 cents per transaction, merchants naturally are going to drive debit-card business to the big banks.”
Wingert said it costs financial institutions to issue the cards, and banks are liable for losses resulting from fraud.
“Fraud losses are real, and they are meaningful,” said Wingert, who added that he expects there will be a court challenge once the new rules come out.
The president of Community Bank Service Corp., a state association subsidiary that handles financial services for members, said the group has asked Visa and MasterCard to consider shifting more of the fraud-loss risk to merchants.
“What it (12 cents) covers is processing costs. What it doesn’t cover is the cost of the plastic, the cost of fraud and other costs,” said Mike Kelley.
Community banks will either lose money or be forced to raise other consumer fees to compensate if the new limits are implemented.
“Costs would be shifted elsewhere,” said Kelley.
During an appearance Friday at the Trout Lily Cafe in downtown Springfield, U.S. Sen. Dick Durbin, D-Ill., a leading Senate supporter of the limits, said Chase Bank, Bank of America and Wells Fargo alone make approximately $8 billion a year from debit-card transactions.
He noted that the average U.S. fee of 44 cents for Visa and MasterCard transactions compares with just 9 cents in Europe.
“What we’re doing is calling on the Federal Reserve to issue this rule as quickly as possible, so that businesses across America know what the rules will be from this point forward,” Durbin said.
Cafe owner Kate Hawkes said that, by the time she subtracts transaction fees and other costs, she probably loses money on some debit-card sales.
“We have tourists coming through all the time, and the debit cards are killing us,” said Hawkes. “We have a sign on our cash register sometimes that says cash is cheerfully accepted.”
Motorists may already have benefited from the swipe-card controversy, said Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association, which represents the state’s convenience-store industry.
Fleischli said some stations have started giving discounts of 5 cents a gallon when motorists pay cash.
“They are trying to avoid that (fee) cost,” said Fleischli. “It gives the people a savings if they use cash, and it helps the marketers, too.”
No comments:
Post a Comment