June 29, 2011
Public Citizen Critiques Federal Reserve Surrender To Bank Lobbyists
On Debit Card Swipe Fees, Fed Favors Banks Over Consumers
WASHINGTON, D.C. – Today, the Federal Reserve capitulated to intense lobbying by bankers to undermine the Dodd-Frank Wall Street Reform and Consumer Protection Act reform of debit card swipe fees.
“While Congress spoke clearly that fee-fat banks can no longer sneak billions of dollars in stealth charges from debit card users, it appears that the Federal Reserve buckled under the weight of the banking lobby,” said Bartlett Naylor, Public Citizen financial policy advocate.
Debit card payments have grown more than any other form of noncash payment over the past decade, according to a study by the Fed. They’ve increased from slightly more than 8 billion payments in 2000 to nearly 38 billion payments in 2009. Debit cards are accepted at roughly 8 million merchant locations in the United States.
Swipe fees, formally known as interchange fees, have been a controversial feature of the debit card system. Most consumers are not aware of these fees, according to the Federal Reserve study. The fees amount to an annual tax of more than $12 billion on retailers and American consumers.
The good news is that American consumers may still receive a small break. The new Fed cap will be 26 cents for each transaction. That’s more than double what the Fed originally proposed after conducting a study of the industry — and before the bank lobby blitz. But it’s less than the estimated 44 cents now charged on the average transaction.
The Dodd-Frank act included this swipe fee reform measure at the urging of Sen. Dick Durbin (D-Ill.). The banking industry lobbied hard to repeal this provision in the Dodd-Frank act, falling a few votes shy in a Senate vote June 8.
“It’s a shame to see that the Federal Reserve fell short where Congress stood firm,” Naylor added. “This rule is a partial victory, but we wish we could claim a full one.”
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.