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Policy & Government

Retailers evaluate the new swipe-fee reform legislation

New debit-card swipe fee legislation went into effect Oct. 1, but some retailers told SNEWS they're unsure if they'll see any significant changes to their bottom line. Some lawmakers are trying to repeal the legislation, but that's unlikely to pass said Craig Shearman of the National Retail Federation.

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Industry retailers told SNEWS® they have yet to see significant savings from new debit card swipe fee legislation, which took effect Oct. 1, 2011, and they are unsure if it will it will help in the long run.

The legislation, part of the Dodd-Frank Wall Street Reform Act, placed limits on the amount banks can charge retailers for consumer debit card purchases, lowering the average debit swipe fee from about 40 cents per transaction to 21 cents. The theory is that retailers could then pass the savings onto consumers.

Outdoor, fitness and wintersports retailers we spoke said the savings are minimal, so only time will tell if the savings are significant over time, and some fear that other fees will just take the place of the old ones.

Adding up savings

Gary Neptune of Neptune Mountaineering ( in Boulder, Colo., said though the idea of the legislation is simple, it’s not realistic.

“The idea that we can save a penny and pass it on is a joke,” Neptune said. “That’s the most unrealistic idea. We’re barely making it.”

For Scott Egbert, owner of Chicago Home Fitness (, “It’s hard to say,” whether the legislation will make a significant impact on his business. “The actual amount of debit card transactions we get are very, very, very few,” Egbert said. “Most of it is traditional credit cards. … The numbers of transactions are so small it’s really not going to have any effect.”

The legislation does not include a cap on credit card swipe fees, which can be upward of 2 percent of the purchase, only bank-issued debit card swipe fees.

Other industry retailers are more optimistic. Mary Keppler, the accounting manager for The Elephant’s Perch (, said though she hasn’t noticed any significant savings since Oct. 1, “It’s good to see a limit put on” debit card transaction fees. I personally feel that what (banks) were charging before was out of line.” She said the store would have to wait until at least the end of the month to assess how much the Ketchum, Ind. store saved.

Bill Bartee, owner of Jesse Brown’s Outdoors ( in Charlotte, N.C., was another retailer who saw the light in the legislation.

“We save money so we like the (legislation) as it is now,” Bartee said. “Our cash business is dead, our check business is dead; all of our business happens on rewards credit cards or debit cards. We have a lot of people who use debit cards and it saves us so much money.”

But Bartee notes there are repercussions to legislation like this. Banks might try to recoup their losses by charging fees for other things in the future, which could make things even more difficult on retailers. “It costs a lot to be in business already and it’s just one more increase in the cost of doing business.”

Indeed, banks have started looking at ways to recoup the lost fees — although instead of targeting retailers, some are going after consumers. Bank of America recently annouced plans to charge its customers $5 a month to use their debit cards and other banks might do the same. Other bank ideas include increasing fees on checking accounts and scaling back debit-card reward programs.

Greg Garbee, assistant manager of Blue Ridge Mountain Sports ( in Charlottesville, Va., said these types of fees might make customers reluctant to use debit cards and even to spend extra money.

“For me personally if I’m paying bank fees, that’s less money in my pocket to spend elsewhere,” Garbee said. “In an incremental way (bank fees) could add up.”

The waiting game

Craig Shearman, National Retail Federation vice president for government affairs, told SNEWS retailers will have to wait a few months to see any significant savings.

“Retailers are looking very closely at their bank statements right now to see exactly how much they’re saving under the swipe-fee reform,” Shearman said. “You have to see maybe a month or a couple of months worth of actual statements from the bank and compare them against statements from comparable level of sales from before to see how much you’re saving. Once they have those numbers in hand they can decide how to move forward.”

According to the the NRF, the legislation is estimated to save retailers and consumers approximately $6 billion a year.

Some U.S. lawmakers say consumers won’t see the savings, and they are already working to try and repeal the legislation. But Shearman said he thinks the repeal effort will fail.

“If the reform were repealed that would deny billions of dollars of savings to retailers and their customers. We just don’t think that’s going to happen,” Shearman said. “Chances that congress would repeal a consumer protection law like this are extremely thin.”

And the current legislation in effect is already a watered down version of what the NRF first proposed, he said. Shearman said it costs banks only 4 cents to process a debit card transaction and the NRF wanted the banks to charge fees only slightly higher than what they had to pay – 7 to 12 cents at the maximum – and even that was excessive.

“That would have been three times the actual cost,” Shearman said, referring to the 12-cent suggestion.

After heavy lobbying of congress from the banks, the cap was moved to an average of 21 cents per transaction and congress passed the legislation in July 2010 (click here to read the SNEWS story). Shearman and the NRF weren’t happy with this result.

“We think that’s far too much to allow them,” to charge, Shearman said. “Our other argument has always been that a debit card is just a plastic version of a check so if checks pass at face value, then debit cards should as well.”

–Ana Trujillo