Rent-to-own News - Retail fights for swipe fee cap

From the moment he took the reins of the National Retail Federation a year ago, Matt Shay has been intent on increasing the sleepy trade association’s Washington footprint to match the industry’s economic importance.

So it’s perhaps no surprise, according to Politico, that for his first campaign he’s wading into one of the hottest lobbying battles in town: the swipe fee debate.

Retailers and merchants — who supply one in five U.S. jobs and account for about two-thirds of the nation’s economic activity — are pushing lawmakers to oppose legislation sponsored by Sen. Jon Tester (D-Mont.) that would delay new rules proposed by the Federal Reserve to limit how much banks, credit unions and other financial services companies can charge merchants who accept debit cards.

Shay’s campaign is a 60-day sprint to July, when the rules are slated to go into effect. The federation has already spent more than $1 million and expects to spend hundreds of thousands of dollars over the next few weeks airing radio ads in the states and hitting Washington with print and radio messages.

“We’re going to spend a lot of money, but we’re not going to spend nearly as much as the banks,” said Shay, the federation’s president. “You want to peak at tournament time if you want to win the championship. You don’t want to peak early. That’s why [the campaign is happening] now.”

But the financial services industry, which supports Tester’s legislation, sees the retailers’ campaign as an attack on a politically unpopular industry aimed at cutting millions of dollars in costs for big retailers at the expense of banks.

“This is the oldest Washington trick in the book. If you want to raise your own profile and your popularity, you pick an embattled industry and you launch gratuitous accusations at them,” said Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents banks, credit unions and payment networks such as Visa and MasterCard. “Running an ad slapping at Wall Street to try to gain political leverage is not going to change things at the end of the day.”

The retailers’ radio ads are playing in about 10 states, including Montana, West Virginia, North Carolina, Maine and Missouri. And on Monday, the federation launched a similar, inside-the-Beltway print campaign.

A Montana radio ad aimed directly at Tester says, “Two out of every $100 we spend in stores or online go to the credit card industry. Debit card swipe fees charged by Visa and MasterCard and big banks are 10 times higher than the cost of processing paper checks. Sen. Tester knows this, but he’s helping the big banks delay debit card swipe fee reform. Sen. Tester says he’s for the consumer, but Tester lets the big banks swipe our money.”

Banks’ average swipe fee is 44 cents per transaction. The draft rules would cap that at about 12 cents per transaction, according to retailers, who say they would pass on the savings to consumers.

There are no guarantees that merchants will, in fact, pass on the savings, but NRF’s top lobbyist, David French, said “retailers are very competitive” — even cutthroat.

“If you cut a retailer’s costs, they’re going to drive that back in consumer value as fast as they possibly can,” he said.

The value could come in the form of lower prices, free shipping or — at higher-end retailers — more sales staff and better customer service.

Banks, though, aren’t convinced.

“This is why they’re spending millions of dollars on a campaign? To pass along the savings to consumers? I don’t buy it,” Wexler said.

Besides, Wexler argued, that’s not how the economics work. When money is shifted from one industry to another — in this case, from the banks to the merchants — the parties on the receiving end pass on much less of the savings to their customers and are much slower to do it. The parties losing the money — in this case, the banks — pass along the full cost to consumers almost immediately, she said.

“Consumers will lose,” Wexler said, “because they’re going to end up paying more on their cards than they will save in any kind of benefit at the register.”

The average swipe fee is about 1 percent of the sale amount, she said. And capping the fee at 12 cents a transaction means banks would earn the same fee on a case of beer as a flat-screen TV — even though the fraud costs alone are exponentially higher on the TV.

Debit cards offer convenience and security to merchants, she said.

“When retailers accept debit cards, they make more in sales. They reduce expenses like bounced checks that they can never recover,” she said. “This is a value to their business that is well in excess of the penny on the dollar.”

The banks have also been out in force on the airwaves. Since February, the Electronic Payments Coalition has launched a seven-figure campaign in 25 states that includes a mix of TV, radio, print and online advertising, she said.