Archive for the ‘Dodd-Frank Wall Street Reform and Consumer Protection Act’ Category

Retailers Sue Fed Over Debit-Card Fee Rule

Wednesday, January 25th, 2012

WASHINGTON—The National Retail Federation and other trade groups filed a lawsuit Tuesday against the Federal Reserve, arguing that the agency went too easy on banks when it set limits on the debit-card fees banks charge retailers.

The lawsuit marks the latest development in an intense battle between financial firms and retailers, two of the nation’s most powerful industries, over how much banks should charge retailers each time a consumer swipes his debit card at the cash register.

The 2010 Dodd-Frank law required the Federal Reserve to take steps to ensure that the debit interchange fees banks charge retailers are reasonable compared to the actual cost of processing debit-card transactions. The provision at the center of the debate is the Durbin amendment, named after Sen. Richard Durbin of Illinois, the Senate’s No. 2 Democrat who authored the provision requiring debit-fee caps and has been an outspoken advocate for retailers fighting for lower debit-card transaction fees.

However, the retailers say the Fed’s rule hasn’t led to fair rates. In fact, they argue that in some cases the Fed’s rule has proven counterproductive, leaving retailers at risk of paying higher, not lower, fees.

The Federal Reserve didn’t have an immediate response to a request for comment.

The lawsuit was filed by the National Retail Federation, the Food Marketing Institute and the National Association of Convenience Stores as well as two individual retailers—Boscov’s Department Store, a department store in Reading, Pa., and Miller Oil Co., a convenience store based in Norfolk, Va. The plaintiffs filed the lawsuit in U.S. District Court in Washington, D.C.

According to the complaint, Miller Oil will actually pay a higher debit-card interchange fee because of the Fed’s rule.

Boscov pays between $7 million and $8 million a year in interchange transaction fees and “will be directly impacted” by the Fed’s “erroneous implementation” of the law, according to the complaint.

“The Federal Reserve was required by law to come up with swipe fees that were ‘reasonable’ and ‘proportional’ but what we got were neither,” National Retail Federation Senior Vice President Mallory Duncan said in a statement. “Instead, the Fed allowed themselves to be influenced by the very banks they are supposed to regulate and raised the originally proposed cap to include expenses the law said were not allowed.”

In June, the Fed ordered the nation’s banks to cut the rate they charge merchants for debit-card transactions roughly in half, to 21 cents. The rule, which went into effect Oct. 1, was much more moderate than the 12-cent limit the Fed originally proposed in December 2010.

Mr. Duncan argues that the Fed “gave away half the savings” the merchants could have seen. “We want them to go back and follow the law this time,” he said.

The plaintiffs argue that the Fed got it right when it proposed a 12-cent cap last year and criticized the Fed because it “reversed course” after the banking community objected to the proposal. The retailers argue that the Fed’s rule is “invalid under the Administrative Procedure Act,” which outlines the way federal agencies establish regulations. They also listed a host of technical examples they say prove deficiencies in the Fed’s method for calculating the fee cap.

Merchants that accept debit cards “are substantially harmed” by the Fed’s “misconstruction” of the Dodd-Frank law’s provision limiting debit card fees, the plaintiffs said in the lawsuit.

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The Durbin Amendment can have a HUGE effect on your bottom line.

Wednesday, January 25th, 2012

Do you accept credit cards for payment?

The Durbin Amendment can have a HUGE effect on your bottom line.

If you accept credit cards as a form of payment you have probably heard of the Durbin Amendment or the Dodd-Frank Act and how this landmark decision would save you money on the fees you pay to accept credit and debit cards.
The GREAT news is that this is true; however, there are some things that you need to know to ensure you see the savings this act was intended to save you.

The Durbin Act puts a cap on what the issuing banks can charge for debit/check card transactions.
The Durbin Act does NOT

    put any restrictions on what your merchant services provider can charge you. In other words, your credit cards processors costs on Debit transactions dropped by almost 50% October 1st 2011 and is up to them whether they pass any of this additional saving on to you.

    A recent survey of the payments market showed that about 26% of card payments are made using a Debit card.
    I have talked with many merchants who because they were doing more business and commercial cards didn’t think this would apply to them. Here is a great example. I have a Freightliner dealer client in Baltimore whose effective rate went from 2.57% to 1.43% Oct 1st .To their amazement many of the commercial cards accepted was tied to a checking account and fell under the Durbin amendment.

    The Durbin Amendment to the Dodd-Frank Act “Caps” the cost of processing a Debit Card payment at .05% .22 cents

      and the possibility to add on 1 cent if certain criteria are met. This represents a HUGE savings to merchants.
      Let’s take the Freightliner dealer example to see the savings potential. Interchange for commercial and business cards can range from 2.05% to 2.95% compare this to the .005 + 22 cents for regulated transactions under the Durbin Amendment.

      That’s a savings of 2% to 2.90% on regulated commercial cards tied to a checking account.

      How do you ensure that your business benefits from the Durbin Amendment?

    First of all if you are on a Tiered pricing structure and see the words “Qualified,” “Mid Qualified,” “Non-Qualified” on your statement you need to call your processor and insist on interchange pass through pricing or look for a processor who provides cost plus.

    Cost plus or interchange pricing is a pricing method that was generally reserved for merchants who processed a very large volume of credit card transactions. Its transparency allows you to see exactly where your processing dollars are going.

    Interchange plus pricing works much like it sounds. Your transactions are passed through at interchange/cost and your processor adds a fixed markup in the form of
    a basis point and transaction fee. This pricing structure will ensure you’re getting 100% of the Durbin savings.

    Are you getting 100% of this rebate? Would you like a no obligation review to see how much you could be saving each month?

    Fax your last month’s processing statement to statement analysis 301 790 1998 or email

    info@revolution-payments.com

    www.revolution-payments.com

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Dodd-Frank Wall Street Reform and Consumer Protection Act

Wednesday, April 6th, 2011

It was bound to happen. In their rush to complete a comprehensive financial reform package last year, Democrats in the U.S. House of Representatives caved in to a poorly conceived plan to help out Main Street and stick it to Wall Street by effectively redistributing costs and revenues associated with debit card payments.

Now, as reality sets in, there’s a growing sense that the so-called Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, does anything but protect consumers – that it might actually push more Americans away from the financial mainstream and swell the ranks of unbanked.

At issue is a long-standing feud over the costs incurred (implicitly and explicitly) in processing credit and debit card payments and the fees banks assess merchants for accepting card payments.

Banks that issue credit and debit cards are paid a fee each time those cards get used at a merchant’s checkout. This fee, known as interchange, can vary, but typically works out to between 1.1 percent and 4 percent of the ticket total. Interchange gets assessed by the card companies and is factored into the overall price a merchant’s bank charges for card processing (sometimes known as the merchant discount).

Retailers have complained about interchange for years. In 2003, led by the retailing giant Wal-Mart Stores Inc., retailers secured a multibillion-dollar out-of-court settlement with Visa Inc. and MasterCard Worldwide over claims the card companies had been overcharging on interchange.

Was Congress hoodwinked?

Over the past few years, retailers managed to win over public sentiment and congressional leaders with a massive public relations campaign against what they dubbed “swipe fees.” Equating interchange with a tax, retailers argued that interchange relief would result in lower prices to consumers.

However, generally they have been unable to provide any tangible evidence backing those claims. I recall a treasury exec from a major retailing chain being asked to do just that during a 2009 symposium at the Chicago Fed. His response went something like this: it’s not something we can say with any certainty … it might work out only to be like 99 cents instead of $1 for a can of soda.

Now some folks are suggesting that Congress was hoodwinked by merchants and that many small merchants were hoodwinked, too, by the big-box stores. And there’s a movement afoot in Washington to delay or revise the Durbin Amendment, which instructs the Federal Reserve to regulate interchange assessed on debit card transactions to ensure these fees are “reasonable and proportional” to the costs banks incur issuing debit cards and processing payments made using the cards. (Prepaid debit cards are exempt from the statute.)

A proposal the Fed put out for comment in late 2010 would cap interchange at a maximum of 12-cents per transaction, which by the Fed’s own reckoning represents a 70 percent price cut, vis-™-vis 2010, when debit interchange averaged 44 cents a transaction.

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