WASHINGTON--()--Revenue to small banks has been largely unaffected by a reduction in the debit card swipe fee, according to an industry survey of credit unions that confirms similar findings of three other federal agencies on debit reform.
“The big banks have pushed the line that small banks are suffering as a way to stymie further reforms on rising swipe fees on credit cards, but the facts simply don't back them up”
The Credit Union National Association, a trade association representing credit unions, conducted the survey. Upon passage of debit card reform in 2011, the credit union industry and small banks feared a severe financial impact.
However, in an interview with CUNA, the Credit Union Times reported that credit union revenue from debit cards not requiring a PIN -- which account for 61% of all debit transactions – have “remained steady (while) volume … grew.”
“Credit unions have confirmed what the FTC, GAO and Federal Reserve have found: the small bank exemption from debit reform has worked. This news demonstrates that debit reform has been good for consumers, Main Street businesses and smaller banks as well,” said Scott DeFife, Executive Vice President of Policy & Government Affairs for the National Restaurant Association and a member of the Merchants Payments Coalition (MPC).
The MPC is a group of merchants concerned about rising swipe fees and lack of transparency and competition in the credit card market.
Debit reform, legislated in what is known as the Durbin Amendment, limited the big banks’ price-fixing of the fees they charge merchants for debit card transactions. All but the largest banks with $10 billion or more in assets were exempted from the limits.
The credit union survey also reported that revenue from debit cards requiring a PIN dropped only six percent. Even with the drop, the revenue is far more than what banks collected only a decade ago when the fee ranged between about 5 and 10 cents per transaction. CUNA’s chief economist said not enough data existed to determine whether revenue generated by PIN debit swipe fees would go up or not in the future, given the Durbin Amendment’s requirement of greater competition among card processing networks.
The reports from individual credit unions track similar findings from studies conducted by the Federal Reserve, the General Accounting Office and the Federal Trade Commission, which also found no financial impact on small banks and credit unions.
The MPC also said credit card companies and the big banks continue to circulate inaccurate and misleading information to consumers about the impact on smaller banks as a way to kill further reforms on credit card swipe fees, which have more than tripled since 2004 and generate more than $50 billion in annual revenue for banks.
A November 2009 GAO report found that the 10 largest U.S. banks control 88 percent of the credit card market. As such, credit unions and small banks don’t stand to lose if Congress tackles credit card reform.
“The big banks have pushed the line that small banks are suffering as a way to stymie further reforms on rising swipe fees on credit cards, but the facts simply don't back them up,” said Lyle Beckwith, Sr. Vice President for Government Relations at the National Association of Convenience Stores, a MPC member.
Recently banking industry officials claimed smaller banks had suffered from debit reform because the exempted banks had received smaller payments from companies that process debit card transactions.
However, these same banking officials failed to state that the Durbin Amendment did not reduce processor fees. In fact, many processors have reaped a fee windfall as some of them kept charging merchants as though swipe fees had not been reduced, said Beckwith.
“Some processors and acquirers, including small banks, have realized greater revenue resulting from reform. They should be ashamed of themselves claiming their acquiring fees have gone down when some of them have taken advantage of the reforms to grab extra money,” he said.
Rising faster than health care costs, swipe fees are the second highest expense for merchants and are calculated into consumer prices. That equates into a $462 annual “tax” on every U.S. household levied by a credit card industry that operates in a non-competitive environment without any transparency. Visa and MasterCard control 80% of the credit card market and set the fees in secret. Unexplainably, swipe fees on credit cards are higher in the United States than anywhere else in the industrialized world – including a full eight times higher in the U.S. than in Europe.
The Merchants Payments Coalition - UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees.