[Pages S2020-S2026]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

INTERCHANGE FEE REFORM

Mr. DURBIN. Madam President, I rise to speak about the issue of swipe
fees. Most people do not know what a swipe fee is, but it is almost
part of your daily life. The next time you reach into your wallet or
purse and pull out a piece of plastic to pay for something--such as my
debit card--and present it at a retailer or a restaurant or a hotel or
a gas station, understand what is happening in that transaction. There
are several things that are not even visible.
What is happening in that transaction is, you are paying that
merchant and your bank is going to honor that payment from your account
on your debit card, but then the bank and credit card company are going
to charge the merchant for the transaction.
In days gone by, if we paid in cash, obviously, there was no fee
involved. If we paid with a check--which was done for a long time and
is done less and less now--there were pennies charged to process the
check. Whether the face amount of the check was $1 or $100--pennies to
process the piece of paper through the system.
A much more efficient system is being used with debit cards, where we
actually are withdrawing money from our own account to the credit of
the restaurant or the retailer. Unfortunately, there is a fee involved
charged to the merchant or retailer called the swipe fee--accurately
called the swipe fee because what has happened is, these major
companies--Visa and MasterCard and the banks that issue their cards--
have established how much each transaction will pay in this swipe fee
or interchange fee.
The Federal Reserve recently did an analysis and found something
interesting: They found that the average swipe fee across America is 44
cents for each transaction. Then they said: Well, what does it actually
cost to process this debit account movement of money from one place to
another? The answer was: 10 cents or less.
So there is a substantial charge involved in the hundreds, thousands,
tens of thousands, millions of transactions that go on every single
day, and it has a direct impact on the places where we do business. It
means there is an added cost to the retailer or merchant that we are
doing business with for the use of the debit card that goes beyond the
actual cost to the bank involved.
You say to yourself: Well, that is business, isn't it? If you are
going to take these cards, and you want the convenience of using these
cards, you have obviously negotiated 44 cents and that is the way it
goes. Wrong. There is no negotiation involved. The retailers and
merchants literally have no bargaining power in what that fee will be,
and over the years, that swipe fee, or interchange fee, has been
creeping higher and higher. For many businesses across America, it is
the second or third most expensive item in doing business. That is
right. Beyond the cost of personnel and workers and beyond the rental
and utilities paid or health insurance comes the swipe fee--the fees
charged by credit card companies for the use of debit cards and credit
cards.
What we said last year, while we were debating financial reform, was,
this price fixing by the credit card companies--and there are two
giants, Visa and MasterCard, that control 80 percent of the card
transactions in America--this swipe fee that is being charged by them
should be reasonable and proportional to the actual cost of the
transaction. They should not be able to force feed and price fix an
excessive swipe fee, or interchange fee, on retailers and merchants
across America.
We said to the Federal Reserve: Take a look at this and try to figure
out a way to establish a reasonable, proportional fee since the credit
card companies and the big banks are not going to negotiate. The Fed is
in the process of doing it.
We also said any bank or credit union with less than $10 billion in
assets will not be affected by this. Our object was to make sure the
hometown banks, the local banks, the local credit unions, could
continue to receive interchange fees without any type of oversight by
the Federal Government. Some people said: Why didn't you include them?
Well, we tried to give them an opportunity to continue to do business
because, frankly, those who are closest in the communities are the ones
we ought to be mindful of and protective of.
Perhaps I have a little prejudice involved too. The biggest banks in
America--the top 1 percent of banks in America--are the ones that do
almost 60 percent of this card business. I am talking about the same
Wall Street banks that ended up getting a bailout from the Federal
Government, to the tune of hundreds of billions of dollars. I do not
have a lot of sympathy for them. They made some stupid mistakes and the
taxpayers came to their rescue. From my point of view, we should not be
subsidizing them or creating an opportunity for them to fix prices when
it comes to merchants and retailers across America.
This passed last year with a strong bipartisan vote of 64 Senators,
and the biggest banks in America and the biggest credit card companies
in America have been working nonstop ever since to stop this from going
into effect. They have poured more resources into this effort than I
have ever seen, and I have been around this place for a while. They
want to stop this because they hate swipe fee reform like the devil
hates holy water. For them, it is a dramatic loss of money. How much?
Each month--each month in America--these debit swipe fees generate $1.3
billion--$1.3 billion--for the banks at the expense of merchants and
small businesses and large businesses, too, for that matter, across
America. But not just at their expense. These swipe fees are being paid
every time a person uses a debit card or a credit card to pay the
government, to pay a university, to make a charitable contribution.
That is a reality, and $1.3 billion a month--most of it going to the
biggest banks in America--they believe is worth fighting for.
So the fight has been joined, and Senators have come to the floor and
submitted an amendment to postpone this swipe fee reform for 2 years--2
years--to study it. Let me see, 24 months times $1.3 billion--over $30
billion they want in a handout to the biggest banks and credit card
companies in America. I do not think that is fair. It is sure not fair
to the small businesses that had asked me to introduce this and ask me
to continue to fight for it. It is not fair to these businesses or
their customers.
You see, our reform efforts are not just supported by the businesses.
They are supported by the Consumer Federation of America, the largest
consumer advocacy group in the United States. They understand that if
you are dealing with a competitive business--let's assume you have gas
stations across the street from one another and you make more
profitability at one gas station, they can lower prices and be more
competitive with the gas station across the street. The same is not
true when it comes to big banks and credit cards. When it comes to
credit cards, we have not a monopoly but a duopoly--two monopolistic
companies, very little competition between them. There is a lot of
competition in small town America and Main Street America.
Some people ask me why I tackle some of these issues that involve the
big banks and credit card companies and others. They say: Don't you
understand these operations you are fighting are pretty large in terms
of their resources and their political might? There is truth in that.
The banks are a $13 trillion industry in America, according to the
American Bankers Association--$13 trillion--and last year the banking
industry in America made over $87 billion in profits.
Visa and MasterCard were spun off from big banks a few years ago and
now are multibillion-dollar companies that control nearly 80 percent of
the payment card market.
People tell me these financial industry giants have unlimited
resources,

[[Page S2021]]

and they are going to fight when there is $1 billion a month on the
table.
Well I do not think the people of Illinois sent me--or sent from
their own States other Senators--to hand the keys of this country over
to big banks and credit card companies. They sent me to make sure Wall
Street banks follow the same rules of the road that Main Street
businesses follow every single day.
There is nothing wrong with fees charged for services provided, as
long as those fees are transparent and are set in a competitive market
environment. Don't tell me you are for a free market and then say but
Visa and MasterCard can fix prices. Don't tell me you are for a free
market and then say those prices they fix have to be concealed and
hidden from the public.
When markets are characterized by transparency, competition, and
choice, consumers benefit. But consumers do not benefit when fees are
hidden, changed without warning or set by agreement between
competitors. Sadly, that describes many of the fees banks and card
companies have charged in recent years.
We passed the Credit CARD Act of 2009 and then the Dodd-Frank Wall
Street Reform Act last year and the Consumer Financial Protection Act
was also included. We targeted many of the hidden fees consumers pay in
America. If we do not do it, ladies and gentlemen, if the Senate does
not do it, I would say to my colleagues: It will not be done.
These powerful economic business entities in America need to be
watched closely. Do not take my word for it. Take the word of those who
analyze the recession which we are dealing with. Left to their own
devices, these entities will go to extremes when it comes to profit
taking, and that is what is happening when it comes to these big banks
and credit card companies today. If we do not stand for consumers and
small businesses on the floor of the Senate, shame on us. Who else is
going to do it?
By making fees transparent and helping to inform consumers, our laws
will help the financial services market work better for all Americans.
This swipe fee, or interchange fee, reform amendment I added to the
Dodd-Frank bill also addressed an anticompetitive market failure in the
debit card system. For years, the banking industry has engaged in a
collusive practice. The banks that issue the cards have let Visa and
MasterCard fix the interchange fee rates banks receive from merchants
every time a debit card is swiped. The banks get the fees, but they do
not set the fees. Their friends at Visa and MasterCard set the fees
that will be charged. This is price fixing, purely and simply, by Visa
and MasterCard on behalf of thousands of banks, and this price fixing
is currently unregulated.
Of course, every bank in the country is going to tell us the
interchange system is working just fine, Senator. That is because with
centrally fixed interchange rates, banks do not have to worry about
competition. Each bank knows the bank down the street is getting the
same fee they are. But there are two fundamental problems with Visa's
and MasterCard's fixing of these interchange rates and swipe fees.
First, centralized rate fixing gives the card-issuing banks no
incentive to manage their operational and fraud costs efficiently. All
banks in the Visa network are guaranteed the same Visa price-fixed
interchange rate whether they are efficient or not. There is no
competition and the fees literally subsidize inefficiency.
Second, because Visa and MasterCard, the credit card giants, control
nearly 80 percent of the debit card market and merchants can't
realistically refuse to accept them, Visa and MasterCard have the
incentive to constantly raise interchange rates to encourage banks to
issue more of their cards. So fee rates keep going up and the merchants
are helpless to do anything about it.
I have heard so many speeches on the floor of the Senate about how we
love our small business, and we should. It is the backbone of the
economy of America. This interchange fee goes to the basic survival of
small businesses across America. If this Senate is going to decide that
it is more important to protect the big banks and credit card companies
than small businesses, shame on us. We should accept the reality that
it means these small businesses will struggle, will not be as
profitable, will not hire as many people. Can that make us a better
country? Can that help us out of the recession?
Merchants can't say no to Visa and MasterCard because of the market
power of these two credit card giants and because swipe fee rates are
fixed by the networks. A merchant doesn't even have the option of
negotiating a better deal, so merchants are stuck with whatever the
increase is in swipe fees, which is then passed along to consumers in
the form of higher prices for gasoline and groceries. Consumers, and
particularly low-income and unbanked consumers, pay for the debit
interchange system to the tune of $16 billion a year.
Incidentally, do my colleagues know what the interchange fee is in
Canada charged by Visa and MasterCard--the same fee I have been talking
about here--through the banks in Canada? Zero. There is no interchange
fee. Do my colleagues know what it is in Europe? A fraction of what it
is in the United States. Why is that the case? Why would these credit
card giants say they can't survive oversight of their interchange fees
in the United States and charge zero in Canada and pennies in Europe?
Because the Canadian Government came to them and said, We are not going
to let you rip off our small businesses. We will regulate you. They
said, Never mind, we won't charge an interchange fee in Canada. In
Europe, the same thing happened. If we are silent, exactly the opposite
will occur. The credit card companies will continue to increase these
fees at the expense of American consumers and small businesses and
large businesses alike.
Some people out there apparently trust Visa and MasterCard to price
fix in a fair and benevolent way. They don't see the need for reform.
If you believe the giant credit card networks can be trusted to fix
interchange prices in a way that is fair for banks, merchants, and
consumers, then you should be fine with the status quo and have no
problem prolonging it for years.
That is exactly what the amendment coming before us will do. It will
postpone for 2 years and put in a study of this issue. Well, we should
study things before we act on them, that is for sure. But let's look at
the record. We have had nine different congressional hearings on this
issue and three separate studies already. We have studied this one to
death. What the banks and credit card companies want us to do is to
keep on studying so they can collect $1.3 billion every single month.
That is their strategy.
I don't place my trust in Visa and MasterCard, and I am not alone.
Last year, a strong bipartisan majority in Congress said we better
stand up for small business and retailers and consumers, and we passed
this law. The banks and credit card companies are pulling out all the
stops. I learned yesterday that Chase, which is one of the major
issuers of these debit cards across America, sent a letter to their
customers in a number of States and said, If you don't repeal the
Durbin amendment, we are going to end up in a position where we won't
be able to give you all of the rewards which we are offering you on
your debit and credit card.
First, this relates to debit cards which don't carry the big reward
programs. Secondly, this kind of veiled threat from these credit card
companies should not be taken seriously by any consumer across America.
The last time we had credit card reform, we unfortunately waited
months before it became law. The credit card companies saw it coming.
So what did they do? They dramatically raised their interest rates on
consumers across America during that period of time. Don't expect any
favors from this industry. If we do not regulate the credit card
industry and the banks that issue these cards, trust me, the consumers
will continue to lose time and time again.
As for Chase, I don't think there are going to be any poppy flowers
sold on their behalf on street corners. If I recall correctly, their
last earnings report showed a 48-percent increase in profits over their
previous year. They are doing quite well. Now it is time for

[[Page S2022]]

them to give small businesses and consumers across America a break when
it comes to the fees they are charging.
Congress said that if banks are going to let Visa and MasterCard fix
the interchange rates that merchants pay banks, then the rates fixed on
behalf of the biggest 1 percent of banks must be reasonable and
proportional--reasonable and proportional. This is a narrowly targeted
reform through the Federal Reserve. The new law will provide a
constraint on ever-rising interchange fees that the current broken
market does not provide.
We have given this job to the Federal Reserve. They have put out
draft rulemaking and they are soliciting comments across the country.
Chairman Bernanke called me a couple of days ago and said they needed
an additional few weeks to come up with the rule that will still go
into effect in July of this year. I understand that. I want him to do
his best. I want him to follow what this law says--exempting credit
unions and community banks with less than $10 billion in assets.
The Fed has taken this job seriously, and I am glad they have. The
Fed knows that many small banks are concerned the reform might affect
them even though the law clearly exempts them. Last week Chairman
Bernanke told all those small banks at a meeting that he understands
their concerns and will work with them to make sure the final rule
addresses them.
I urge my colleagues to stand up for the reasonable reform Congress
passed last year. We don't need another study. A study is an excuse for
the credit card companies and the biggest banks in America to take $1.3
billion a month out of the economy and away from small businesses.
I want my colleagues to know there is broad support for debit
interchange reform. I have received many letters in recent days from
individuals, small businesses, and organizations that support reform. I
will readily concede that the big box retailers are also benefitted by
this. I am not trying to hide that. That is a fact. But the simple fact
of the matter is this has been generated by a lot of local people and a
lot of local businesses.
Let me tell my colleagues, this is hardball as far as the big banks
and credit card companies are concerned. I happened to mention that I
was brought to this issue 4 or 5 years ago by a good friend of mine, a
very conservative gentleman who has been very successful in downstate
Illinois, named Rich Niemann from Quincy, IL. He owns a bunch of
grocery stores and has expanded all across the Midwest. He is a hard-
working guy the like of which is hard to find. He and I disagree on a
lot of things, but I always turn to him when I have a business issue
because I know he will give me an honest analysis. When Rich told me
that he started accepting plastic at his grocery stores, it went from
just a small number of transactions to now almost half of the
transactions at his grocery stores are with plastic and he says, They
are killing me with this interchange fee. The credit card companies and
debit card companies are charging him this fee and he has no voice or
bargain in the process. They charge whatever they want to charge and he
pays it. He is a man who is trying to create jobs in small-town
America. I thought he had the right approach to this. They should be
able to recover their reasonable, proportional costs for using a debit
card, but why should they be able to penalize a business such as Rich
Niemann's grocery stores? I said this publicly a couple of days ago
and, not surprisingly, some folks on the other side decided to go after
and attack Rich Niemann as a businessman. I will stand with him. From
my point of view, he is a good man. I don't think he votes for a lot of
Democrats. I hope once in a while he might vote for me, but
notwithstanding that, I respect him so much and I am sorry he had to
take this beating in the press from the other side. He can take it,
though. He has been a tough guy who has stood up for his family and his
business all his life.
Incidentally, on March 18 I received a letter from the American
Council on Education and nine other national associations representing
colleges and universities and here is what they said:

Debit card swipe fees have been a hidden expense for
students and families paying for college for which they
receive no benefit. As a result of the law enacted last year
and the Federal Reserve's proposed rule, we believe colleges
and universities will see reduced debit card costs which they
will be able to pass on to students through lower costs as
well as increased resources for institutional grant aid and
student services.

We don't think about that. We think about gas stations. But the fact
is students use plastic for everything, and the universities and
colleges end up paying these swipe fees to the big banks and the credit
card companies and debit card companies as a result.
On March 15 I got a letter from the Consumer Federation of America.
Some of the folks on the other side said this will never help
consumers. These businesses are going to take all the savings that
would otherwise go to the big banks and credit card companies and they
are going to take those and go home. Well, I disagree, and so does the
Consumer Federation of America, the leading consumer advocate in this
country. Here is what they said on March 15:

The current interchange system is uncompetitive,
nontransparent, and harmful to consumers . . . CFA does not
support delaying implementation of the new law.

That is what the amendment on the floor today suggests.
On March 15 I received a letter from the consumer groups Public
Citizen and U.S. PIRG, and here is what they said:

The Durbin amendment was designed to curb anticompetitive
practices in the payment card market . . . we do not support
legislation calling for delay of the Durbin swipe fee
amendment.

Yesterday I received a letter from Americans for Financial Reform, a
coalition of over 250 national, State, and local groups, including
consumer, civil rights, investor, retiree, labor, religious, and
business groups. Here is what they said:

From a consumer point of view, the current interchange
system is not defensible. Feeble competition in the payment
card marketplace has led to unjustifiably high debit
interchange fees that the poorest Americans, generally cash
customers, are required to subsidize at the store and at the
pump. . . . We oppose efforts to delay the implementation of
the Durbin amendment through Congressional action.

Make no mistake, the big banks and card companies want to stop this
rule before it is issued, because they are afraid that once it is
issued and once people realize the savings to business and consumers
across America, they will never go back. So they are pouring it on to
try to move this amendment as quickly as possible to stop the Federal
Reserve from issuing the rule which the law requires them to issue.
On March 17, the Hispanic Institute sent me a letter and here is what
they said:

Sixteen countries and the European Union regulate swipe
fees and their experience demonstrates that regulation
benefits consumers in lower fees and lower cost of goods.
There is no evidence that swipe fee regulation will lead to
an increase in other consumer fees.

The National Small Business Association--as I said, we spend more
time on the Senate floor venerating small businesses than almost
anything other than our troops. Here is what the National Small
Business Association said in a statement on March 23:

The Durbin amendment and the proposed Fed rule are
beneficial to America's small businesses. Further delay,
equivocation, and another big-bank handout are not.

I also received a letter from 185 national and State merchant trade
associations representing 2.7 million stores and 50 million employees.
Let me say at the outset, the coalition I am representing is not
nearly as powerful or as large politically as the big banks and the
credit card companies. They can't match them in terms of their
political power, the number of lobbyists they hire, the number of
letters they send, and all the rest. For the most part, they represent
a lot of small businesses that are trying their best to get fair
treatment. Here is what they say:

We have repeatedly sought to negotiate with the card
companies to reform this broken market and bring savings to
our customers. Fifteen years later, we have concluded that
normal market forces cannot and do not work in a broken
market with price-fixing among banks controlled by a duopoly.

They mean Visa and MasterCard.
They urged Congress to oppose any efforts to delay swipe fee reform.
The United Food and Commercial Workers, a union which I used to
belong to when I was growing up, said:

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Delaying swipe fee reform will also delay the creation of
thousands of jobs each year that will result in reduced
interchange fees. This reform is long overdue for working
Americans everywhere.

The National Community Pharmacists Association and the National
Association of Chain Drug Stores sent me a letter and said:

We request any assistance you can provide in ensuring the
timely completion of the final regulations and enforcement of
the Durbin amendment.

The National Association of College Stores and 20 State associations
wrote and said:

Credit and debit purchases account for more than $100
million annually in interchange fees paid by college
bookstores and their student and parent customers.

Let me repeat: $100 million a year paid by college bookstores and
their student and parent customers in interchange fees to the banks and
credit card companies.
They go on to say:

Excessive swipe fees that would otherwise be returned to
students through lower prices, grants, and student services
are being misdirected toward credit card companies and large
banks. . . . Every month of delay means higher costs for
students and parents at a time when schools are being asked
to do more with less funding.

I ask unanimous consent that these letters be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

American Council on Education,

Washington, DC, March 18, 2011.
U.S. Senate,
Washington, DC.
Dear Senator: I write on behalf of the higher education
associations listed below to oppose efforts to delay, amend,
or repeal the debit card swipe fee reforms enacted last year
in the Dodd-Frank Wall Street Reform and Consumer Protection
Act (``Dodd Frank Act'') and regulatory implementation of
these reforms by the Federal Reserve. We strongly support
these needed reforms, which will provide real relief to
students, their families, and colleges and universities
across the country.
Debit card swipe fees have been a hidden expense for
students and families paying for college for which they
received no benefit. As a result of the law enacted last year
and the Federal Reserve's proposed rule, we believe colleges
and universities will see reduced debit card costs which they
will be able to pass on to students through lower costs as
well as increased resources for institutional grant aid and
student services. In addition, implementing this reform will
create an opportunity for institutions to offer discounts to
students for payments made with checks and debit cards.
During this time of economic insecurity, steps like those
undertaken in swipe fee reform will help students and their
families manage the costs of college with increasingly
strained budgets.
We urge the Senate to stand up for students and the
colleges and universities that serve them by ensuring that
these debit card swipe fee reforms are fully implemented in a
timely manner.
Sincerely,
Molly Corbett Broad,
President.
____

Consumer Federation of America,

March 15, 2011.
Dear Senator: As Congress assesses the impact on consumers
of debit interchange legislation it enacted last year, the
Consumer Federation of America would like to share with you
the conclusions we have reached:
The current interchange system is uncompetitive, non-
transparent and harmful to consumers. It is simply unjust to
require less affluent Americans who do not participate in or
benefit from the payment card or banking system to pay for
excessive debit interchange fees that are passed through to
the costs of goods and services. As a result, CFA does not
support delaying implementation of the new law.
The Federal Reserve should ensure that financial
institutions are reimbursed for legitimate, incremental debit
card costs as it finalizes rules implementing new interchange
requirements. If such compensation does not occur, these
institutions could increase debit card and other related
banking charges on their least desirable and most financially
vulnerable consumers: low- to moderate-income account
holders.
Once the law is implemented, the Federal Reserve should
also pay close attention to how it affects the financial
viability of small depository institutions, especially credit
unions, which often provide safe, lower-cost financial
products to millions of Americans.
Although CFA did not take a position on the interchange
provisions of the Dodd-Frank Act, we have carefully examined
the law and filed comments with the Federal Reserve on how to
implement it fairly and effectively. For example, we urged
the Federal Reserve to consider increasing its proposed
interchange pricing standards as allowed under the law to
include several specific, debit-related expenses incurred by
financial institutions. CFA also recommended that the Federal
Reserve launch a broad, balanced study upon implementation of
the effects of the rule on consumers.
From a consumer point of view, the current interchange
system is not defensible. Feeble competition in the payment
card marketplace has led to unjustifiably high debit
interchange fees that the poorest Americans are required to
subsidize. The new law gives the Federal Reserve authority it
can use without delay to make sure that the debit interchange
reimbursement financial institutions receive covers their
legitimate, incremental costs for providing debit card
services.
Sincerely,
Travis Plunkett,
Legislative Director.
____

March 15, 2010.

Consumer Groups Oppose Durbin Amendment Delay

To the Bipartisan Congressional Leadership: U.S. PIRG and
Public Citizen write in support of the timely implementation
of the Federal Reserve swipe fee regulation as prescribed
under the Durbin Amendment of the Dodd-Frank Wall Street
Reform and Consumer Protection Act enacted last summer. The
law provides numerous reforms to financial industry practices
beneficial to consumers, depositors, investors and taxpayers.
Included in the Dodd-Frank Act is the Durbin Amendment, which
limits the interchange swipe fees charged to retail merchants
on debit card transactions. The Durbin amendment was designed
to curb anticompetitive practices in the payment card market.
It is our understanding that there has been proposed
legislation introduced to delay the implementation of the
Durbin amendment. We do not support legislation calling for
delay of the Durbin swipe fee amendment. While we have urged
the Federal Reserve Board of Governors to modify its proposed
rule implementing parts of the Durbin Amendment (parts have
already taken effect), the rulemaking process, not further
legislation, is the appropriate venue for any changes. In
addition, consideration of a delay in the Durbin amendment
could otherwise imperil timely implementation of the Dodd-
Frank Act's other provisions designed to remediate the
economic crisis caused by risky, unregulated Wall Street
practices.
We appreciate your consideration of our views urging that
the Durbin amendment be implemented by the Federal Reserve,
not delayed in the Congress.
Sincerely,
U.S. PIRG and Public Citizen.
____

Americans for Financial Reform,

Washington, DC, March 30, 2011.
Dear Senator/Representative: We write to express Americans
for Financial Reform's continued support for the Durbin swipe
fee amendment which we supported and was included in the
Dodd-Frank Wall Street Reform and Consumer Protection Act.
The current interchange system is uncompetitive, non-
transparent and harmful to consumers. It is simply unjust to
require less affluent Americans who do not participate in or
benefit from the payment card or banking system to pay for
excessive debit interchange fees that are passed through to
the costs of goods and services. As a result, AFR does not
support Congressional delay of implementation of the new law.
As you know, Americans for Financial Reform is an
unprecedented coalition of over 250 national, state and local
groups who have come together to reform the financial
industry. Members of our coalition include consumer, civil
rights, investor, retiree, community, labor, religious and
business groups as well as renowned economists.
We oppose efforts to delay implementation of the Durbin
amendment through Congressional action. The new law gives the
Federal Reserve adequate authority it can use without delay
to make sure that the debit interchange reimbursement
financial institutions receive covers their legitimate,
incremental costs for providing debit card services.
From a consumer point of view, the current interchange
system is not defensible. Feeble competition in the payment
card marketplace has led to unjustifiably high debit
interchange fees that the poorest Americans, generally cash
customers, are required to subsidize at the store and at the
pump.
Thank you for your consideration of our views. If you or
your staff have any questions, please contact Ed Mierzwinski
at U.S. PIRG.
Sincerely,
Americans for Financial Reform.
____

The Hispanic Institute,

Washington, DC, March 17, 2011.
Hon. Harry Reid,
Majority Leader, U.S. Senate,
U.S. Capitol, Washington, DC.
Hon. Mitch McConnell,
Minority Leader, U.S. Senate, Russell Senate Office Building,
Washington, DC.
Dear Senators Reid and McConnell: On behalf of The Hispanic
Institute, I urge you to oppose Senate Bill S. 575, House
Bill H.R. 1081, and any other effort to delay, amend or
repeal the Durbin amendment which passed last year as part of
the Dodd-Frank Wall Street Reform Act. Delaying
implementation of the Durbin amendment hurts consumers,
especially low- income consumers.

[[Page S2024]]

The Hispanic Institute's mission is to provide an effective
education forum for an informed and empowered Hispanic
America. We have already studied the impact of swipe or
interchange fees on Hispanic America. In fact, we have been
studying the problem of swipe fees for years and have found
that the market for these fees is broken and that Hispanic
American consumers and businesses are harmed as a result.
In 2009 we published a study, ``Trickle-Up Wealth Transfer:
Cross-Subsidization in the Payment Card Market,'' that broke
new ground by showing that hidden swipe fees imposed on
credit and debit cards result in a reverse transfer of wealth
and make low-income Americans subsidize high-income
Americans--without them even knowing it. We also found that
these fees are part of the prices consumers pay every day and
that when fees are lower, prices are lower for consumers. Our
ground-breaking work has since been cited by the Boston
Federal Reserve.
On February 17th, we submitted testimony to the House
Financial Institutions Subcommittee of Financial Services,
along with U.S. PIRG and Public Citizen, voicing support for
the Federal Reserve rule to deal with the problems we have
found. Unfortunately, the banking industry is fighting to
stop these needed reforms. If the banking industry is
successful in delaying or repealing reform, consumers and the
American economy will pay. Studies indicate that consumers
will pay an extra $1 billion to banks every month that reform
is delayed, and the more than 95,000 new jobs that reform
would create each year will be shelved. This should not
happen.
As we noted in our testimony:
The current swipe fee market is broken and all consumers
pay more for less because of escalating swipe fees;
Sixteen countries and the European Union regulate swipe
fees and their experience demonstrates that regulation
benefits consumers in lower fees and lower costs of goods;
There is no evidence that swipe fee regulation will lead to
an increase in other consumer fees; and
Reductions in swipe fees should result in substantially
lower prices for all consumers.
The Durbin amendment and Federal Reserve rule allow banks
to compete on swipe fees and avoid regulation. Reasonable
limits are only imposed when the banks centrally fix their
fees. If they would compete, all American consumers and
businesses would be far better off. We urge you to oppose S.
575 and H.R. 1081, and press for the Federal Reserve's rule
to be finalized and take effect in order to address the
terrible problems with swipe fees that the Hispanic Institute
has identified. Thank you for your consideration.
Sincerely,
Gus K. West,
President, Board Chair.
____

[From National Small Business Association, Mar. 23, 2011]

Bills Introduced To Delay Swipe Fee Reform

The U.S. Federal Reserve (Fed) in Dec. 2010 proposed new
rules limiting the size of the fees banks can charge
businesses every time a debit card is used to pay for a good
or service. The Fed was required to address debit-card swipe
fees thanks to an NSBA-supported amendment, introduced by
Sen. Whip Dick Durbin (D-Ill.), to the Restoring American
Financial Stability Act (S. 3217). The final rule is expected
by April and currently is set to take effect on July 21,
2011.
The Fed proposed a number of options that would result in
reduced swipe fees for debit-card transactions. One option
would allow issuers to set a flat fee of seven cents per
transaction. A second option would allow a sliding scale,
based on the purchase price, with a maximum fee of 12 cents
per transaction. The proposed rule exempts banks with less
than $10 billion in assets and does not apply to credit
cards.
Although NSBA supports no interchange fees being charged on
debit-card transactions--since they clear, like checks, at
par--the proposal represents significant progress. Currently,
merchants pay, on average, debit card processing fees of
about 1.3 percent. According to the Fed, the average swipe
fee last year was 44 cents. This means that even the highest
option would result in swipe fees more than 70 percent lower
than the 2009 average.
The proposed rules also still present issuers with a large
profit margin. According to one bank, a swipe-fee cap of 7
cents per transaction still would produce a profit margin of
about 8 percent, compared to the retail industry's average
profit margin of one to three percent.
While the proposed rule was a significant victory for small
businesses, retailers, and consumer groups, it was met with
immediate howls by the banking industry, which collected
$16.2 billion from debit-card swipe fees in 2009. Arguing
that the proposed rule represented governmental interference
in the private market (and ignoring the fact that the
previous system differed greatly from any notion of a
competitive ``market''), the banking lobby responded to the
proposed rules with a multi-million advocacy campaign aimed
at undermining them.
Last week, they achieved their first success in this
effort, when Sens. Jon Tester (D-Mont.), Bob Corker (R-
Tenn.), Jon Kyl (R-Ariz.), Ben Nelson (D-Neb.), Tom Carper
(D-Del.), Pat Roberts (R-Kan.), Chris Coons (D-Del.), Mike
Lee (R-Utah), and Pat Toomey (R-Penn.) introduced
legislation, the Debit Interchange Fee Study Act (S. 575),
that would suspend the implementation of the Fed rule for two
years.
The bill also mandates that a study on debit interchange
fees be conducted by the Fed, the Office of the Comptroller
of the Currency, the Federal Deposit Insurance Corporation,
and the National Credit Union Administration. The outcome of
this study is virtually guaranteed to be flawed, given the
parameters outlined by the bill.
Companion legislation (H.R. 1081) has been introduced in
the House, by Rep. Shelley Moore Capito (R-W.Va.) and 27
cosponsors.
NSBA is ardently opposed to these efforts, which clearly
are aimed at preventing the rules from going into effect
rather than illuminating the issue. The swipe-fee system
already has been the subject of three separate U.S.
Government Accountability Office reports and nine
Congressional hearings.
The Durbin amendment and the proposed Fed rule are
beneficial to America's small businesses. Further delay,
equivocation, and another big-bank handout are not.
____

February 28, 2011.
To: Members of the United States Senate; Members of the
United States House of Representatives
From: The 185 undersigned national and state trade
associations on behalf of the companies and customers we
represent
Re: Debit Card Swipe Fee Reforms--Allow Implementation to
Move Forward
The Merchants Payments Coalition, representing 2.7 million
stores and their 50 million employees, urges you to oppose
any efforts to amend, repeal or delay swipe fee reform.
Derailing swipe fee reform would take more than $10 billion
per year out of consumers' pockets and kill more than 95,000
new jobs.
Big credit card companies have created a prim-fixing regime
that benefits the largest banks, including ``too big to
fail'' institutions that have received hundreds of billions
of dollars in federal bailout money, at the expense of Main
Street merchants and consumers.
Small merchants in your community are powerless against the
big credit card duopoly. The card companies and big banks
have not and will not negotiate with businesses over swipe
fees. As a result, these fees:
Have tripled over the last 10 years;
Largely benefit the 10 biggest banks;
Are the second highest expense many small merchants face
after labor costs; and
Are rising faster than health care costs.
This issue is unlike any other we have faced in business.
We have repeatedly sought to negotiate with the card
companies to reform this broken market and bring savings to
our customers.
Fifteen years later, we have concluded that normal market
forces cannot and do not work in a broken market with price-
fixing among banks controlled by a duopoly. So we reluctantly
came to Congress.
After seven hearings in the House, two of which were held
since passage of the debit card reforms, a bi-partisan markup
in the House, and two hearings in the Senate on the issue,
legislation passed the United States Senate last summer by a
strong bi-partisan 64 to 33 vote with 17 Republicans
supporting the amendment. Changes were negotiated and adopted
during the conference process before the bill was signed into
law.
The law directs the Federal Reserve to prescribe
regulations regarding interchange swipe fees on debit card
transactions and requires that the Federal Reserve establish
standards for assessing whether an interchange swipe fee is
reasonable and proportional to the cost incurred by the
issuer with respect to the transaction. After a lengthy and
thorough process conducted by the Federal Reserve of survey
design and collection, conference calls, meetings with
various groups, and survey analysis, the Board of Governors
voted unanimously in favor of publishing a proposed rule on
this subject. We see the proposed rule as a compromise of the
ideas advanced by the banks and networks and the ideas
advanced by the merchants and consumers.
The statute further directs the Fed to publish a final rule
by April 21, which would take effect on July 21. The Fed has
indicated that it intends to meet these deadlines unless
Congress directs otherwise, We strongly urge you not to
support delay and to allow the rule to take effect as
scheduled.
Swipe fee reform has been a key vote for each of our
associations every time it has been considered and will
continue to be. We would urge you to learn more about the
issue, listen to all sides, and not sign letters or support
legislation that seek to delay; repeal or modify the proposed
rule.
We urge you to stand with your small Main Street merchants
and their customers and allow swipe fee reforms to take
effect on time.
Sincerely,
The undersigned national and
state trade associations.
____

UFCW,

Washington, DC, March 28, 2011.
To All Members of the United States Senate
Dear Senator: On behalf of the United Food and Commercial
Workers International Union (UFCW) and our more than 1.3
million members, we encourage you to oppose any effort to
delay or repeal the implementation of ``swipe'' fee reform,
also known as interchange fee reform.

[[Page S2025]]

More than one million of our members work in the
supermarket and retail industry where swipe fees are a
growing cost of business and a concern for the continued
success of this important industry. Each time that a UFCW
cashier swipes a debit card, the supermarket is charged a
percentage of the sale. That fee, hidden from customers, is
reflected in higher prices, which in turn impacts our members
and customers each day.
The banks and card companies want these fees to remain
hidden so that they can continue to reap large profits and
subsidize the costly benefits and rewards that they give to
their wealthiest cardholders. Make no mistake, the banks and
card companies want to delay the swipe fee reforms so that
they can continue to charge more than $1 billion in swipe
fees for each month of delay.
But most importantly, delaying swipe fee reform will also
delay the creation of thousands of jobs each year that would
result from reduced interchange fees.
This reform is long overdue for working Americans
everywhere. Our members have paid the price for rising
interchange fees for far too long.
A bipartisan group of 64 Senators courageously passed this
important swipe fee reform in 2010. UFCW respectfully asks
that you oppose any efforts to delay these reforms and allow
the Federal Reserve rule to take effect on schedule later
this year.
Sincerely,
Joseph T. Hansen,
International President.
____

March 8, 2011.
Hon. John Boehner,
Speaker, House of Representatives,
Washington DC.
Hon. Harry Reid,
Majority Leader, U.S. Senate,
Washington DC.
Hon. Nancy Pelosi,
Minority Leader, House of Representatives,
Washington DC.
Hon. Mitch McConnell,
Minority Leader, U.S. Senate, Washington DC.
To the Bipartisan Congressional Leadership: The National
Association of Chain Drug Stores and the National Community
Pharmacists Association are writing in support of the
implementation of the Durbin Amendment, which was included in
the Financial Reform legislation enacted last year. The
Durbin Amendment limits the fees charged to retail merchants
on debit card transactions (known as ``swipe fees'') to a
level that is ``reasonable and proportionate'' to the costs
incurred by the banks and credit card associations to process
these transactions. The amendment also allows retail
merchants options on how their debit card transactions are
routed for processing, which provides market competition for
this part of the process.
The law requires the Federal Reserve to write rules to
enforce the ``reasonable and proportional to cost''
requirement by July 2011, although the precise date for
enforcing the routing rule is left to their discretion. At
this point, the Federal Reserve has issued draft regulations
on what is to be considered reasonable and proportionate, and
they have closed the comment period on the rules.
We believe it is imperative that this process of writing
and issuing final regulations continue as required by the
law. Debit and credit card interchange fees currently total
close to $50 billion annually for retailers. The timely
promulgation and enforcement of the regulations will assure
the beginnings of reform for both debit and credit cards to
assure that fees are ``reasonable and proportionate'' for
retailers and the customers they serve in a highly
competitive marketplace.
We request any assistance you can provide in ensuring the
timely completion of the final regulations and the
enforcement of the Durbin Amendment, and ask you to
communicate that position to the Federal Reserve.
Please contact either Paul Kelly or Anne Cassity if you
have any questions.
Sincerely
Steven C. Anderson, IOM, CAE,
President and Chief Executive Officer, National Association
of Chain Drug Stores.
Kathleen D. Jaeger,
Executive Vice President and Chief Executive Officer,
National Community Pharmacists Association.
____

National Association

of College Stores,

Oberlin, OH, March 18, 2011.
Dear Senator, On behalf of the National Association of
College Stores and the undersigned associations, I am writing
to ask you to not co-sponsor and to oppose S. 575, the Debit
Interchange Fee Study Act of 2011. This legislation would
delay and effectively kill debit card fee reforms scheduled
to go into effect this July; reforms that will have a
positive impact on colleges, universities, elementary and
secondary schools, and the students and parents they serve.
Headquartered in Oberlin, Ohio, NACS is the professional
trade association representing the collegiate and K-12
retailing community. We represent more than 3,100 collegiate
and elementary and secondary bookstores including school
owned and operated bookstores, non-profit student owned
cooperatives, small privately owned bookstores, and contract
managed bookstore companies. NACS member stores serve nearly
95% of America's 17.5 million college students while
supporting the academic missions of education institutions.
Last year Congress enacted reasonable and measured reform
to the swipe fees that colleges and universities, K-12
schools, and other non-profits, and small family owned
businesses pay Visa and MasterCard and the big banks every
time a student, parent, or alumni pay or donate at these
institutions and at collegiate and K-12 retail stores. In
fact, according to a recent report by the National
Association of College and University Business Officers found
nearly \1/3\ of all tuition and fee payments made to colleges
and universities and nearly half of all tuition and fee
payments made at community colleges in 2009 were subjected to
excessively high interchange swipe fees.
Credit and debit purchases account for more than $100
million annually in interchange fees paid by college
bookstores and their student and parent customers. Excessive
swipe fees that would otherwise be returned to students
through lower prices, grants, and student services are being
misdirected towards credit card companies and large banks.
Congress established a lengthy, deliberative, fair, and
open process for the Federal Reserve to carry out needed
debit swipe fee reforms and that process is still ongoing
through July, yet S. 575 is an attempt by the big banks to
derail this process indefinitely. Every month of delay means
higher costs for students and parents at a time when schools
are being asked to do more with less funding.
We strongly encourage you stand up for education
institutions, collegiate and K-12 retailers and our student
and parent customers by not co-sponsoring S. 575, the Debit
Interchange Fee Study Act of 2011, and also opposing any
efforts to move this bill in the Senate.
Sincerely,
Brian E. Cartier, CAE,
Chief Executive Officer.

Mr. DURBIN. In closing, I know what I am up against. Don't take on
Chase and all the big banks of America--the ones that have the lion's
share of these debit cards--and Visa and MasterCard and not get suited
up for battle. This is a darn important battle. It will test beyond the
wisdom or justice of this proposal; it is going to test who owns the
United States Senate. Is this a Senate that is willing to stand up for
small business across America? Is this a Senate that is willing to say
we will fight for consumers even at the expense of the profits of the
banks and credit card companies?
I think consumers across America know on which side we should be. I
hope we will be. We were last year, with 64 Senators, Democrats and
Republicans, joining to stand up for small businesses and large
businesses alike, retailers and merchants. I know the big banks and
credit card companies have enormous resources, and they have a reach in
every direction. I know they are running commercials and sending an
army of lobbyists to Capitol Hill. They also have allies in the Senate.
They will pull out all the stops to roll back any effort to curb their
abusive practices.
I want my colleagues to know I think Main Street is worth standing up
for--certainly, when it comes to their fights with Wall Street. Small
businesses, consumers, universities, labor unions, and merchants are
sick and tired of the banking industry's tricks, traps, and hidden
fees. They want fees they can see, and they want them set up in
competition, not fixed by credit card companies. They want the Wall
Street banks to play by the same rules of the road that the Main Street
businesses play by every day, and I want that too. I hope the Senate
does as well.
I urge my colleagues not to let the big banks and credit card
companies avoid accountability for 2 more years. In the name of a
study, do not give a $30 billion handout to the biggest banks and
credit card companies in America. That is exactly what the amendment
filed on the Senate floor will do. Do not delay interchange reform. Do
not delay swipe fee reform. Don't give those banks another
multibillion-dollar handout with no strings attached.
I urge my colleagues to let the Federal Reserve do the job that was
sent their way. Let them move forward with the important process of
swipe fee reform.
On behalf of businesses and merchants all across America, they are
counting on the Senate to be on their side to help them in reaching
profitability and making sure their savings are passed along to
consumers and in being the No. 1 engine for the creation of new jobs in
America. Our question

[[Page S2026]]

is, Whose side are you on? I am on the side of small business and Main
Street. I hope my colleagues will be as well.
I yield the floor.
The PRESIDING OFFICER (Mr. Coons). The Senator from Massachusetts is
recognized.

____________________