Durbin urges support for cap on merchant swipe fees during Quincy visit
Millions of Americans pay for groceries and other items with debit cards every day.
But each time a merchant swipes a debit card, they are being charged a fee of about 40 cents to do so, which is a becoming a large cost to businesses across the country.
Rich Niemann Sr., chairman of the board for Niemann Foods, said the company paid more than $4 million in swipe fees last year.
"When we have fees attached, we can absorb some of them, but you can only do it so long," he said. "And when the rest of the industry is doing the same thing, the consumer pays the price."
Niemann said it's hard for retailers to make a profit on small purchases made with a debit card. For instance, a $1 purchase paid with a debit card would basically eliminate any profit for the retailer.
"Whatever profit you have is not up to the fee," Niemann said.
An amendment that would cap interchange fees, included as part of the federal financial legislation signed into law last summer, is being challenged in Congress.
U.S. Sen. Dick Durbin, D-Ill., visited the County Market at 48th and Broadway Thursday morning to urge that proposed legislation to delay implementation of the caps be defeated.
The swipe fee amendment introduced last July by Durbin would cap fees at 12 cents per transaction. Banks with less than $10 billion in assets would be exempt from the fee change.
"The average interchange fee is about 40 cents per transaction," Durbin said. "The Federal Reserve tells us the actual cost is 10 cents or less. What they're doing is running up this fee on consumers across America that are being charged at local businesses, running up the costs, diminishing the profits, putting a burden on small businesses."
In a news release, Durbin said debit card swipe fees in the nation average 1.14 percent of the transaction amount, whereas in the European Union, Visa and MasterCard charge swipe fees of 0.2 percent, and fees in Canada are zero.
Durbin said the banking industry receives more than $1 billion a month from the fees.
"The large banks, which got the multibillion-dollar bailouts, I'm sorry, but I'm not going to shed a tear for them," Durbin said. "They're doing quite well. I think they can serve our customers and serve the American economy by helping small businesses."
The Federal Reserve is expected to issue new rules regarding the cap in April. They would take effect in July.
Legislation introduced by U.S. Sen. Jon Tester, D-Mont., would delay the changeover by two years to allow time to study the affect of lower fees.
While smaller banks and credit unions are exempt from the law, independent banking organizations are lobbying for passage of Tester's bill.
But even with the exemption, the Independent Community Bankers of America said community banks still would be forced to lower swipe fees to compete with larger banks.