Retailers Push Back Vs. Banks

WASHINGTON Retailers have begun fighting back hard against efforts by the financial community to scuttle federal regulation of debit-card fees. At least two bills were introduced last week in Congress proposing a delay in the implementation of debit-card interchange-fee regulation, prompting a huge outcry from a wide array of retailers, including supermarket operators. I think the retailers are just

WASHINGTON — Retailers have begun fighting back hard against efforts by the financial community to scuttle federal regulation of debit-card fees.

At least two bills were introduced last week in Congress proposing a delay in the implementation of debit-card interchange-fee regulation, prompting a huge outcry from a wide array of retailers, including supermarket operators.

“I think the retailers are just frustrated because we had made progress toward addressing an issue that is filled with injustice and tremendous challenges for this industry,” Leslie G. Sarasin [4], president and chief executive officer, Food Marketing Institute, told SN last week. “Then to have the big banks and the big credit-card companies try to implement a delay so they can continue to reap the financial rewards of this system that has been in place for as long is just untenable for our members.”

Sen. Jon Tester, D-Mont., along with other senators from both parties, introduced a bill that would delay implementation of the debit-fee reforms for two years. Just a few hours later, Rep. Shelley Moore Capito, R-W.Va., followed with a bill proposing that the interchange rule be delayed for a year.

The moves came after heavy lobbying from banks and other sectors of the financial-services industry, who claim that a cap on debit-fee interchange fees would be too costly.

The Federal Reserve, as directed by the financial-reform legislation that passed last year, is expected to finalize its rule for debit-card interchange in April. It has proposed capping fees at 12 cents per transaction, vs. the current average of 44 cents.

The battle has been waged by the “foot soldiers” on both sides — the local retailers on behalf of merchants, and community banks and local credit unions on behalf of the financial industry.

The financial-services industry has been putting a sympathetic face on its side of the issue in the form of local banks and credit unions — as well as outlining potential costs for consumers if debit-card fees are capped.

Retailers have counter-punched with local examples of their own, including a press release last week issued by FMI that quoted Mike Novak, a single-store operator in Montana, offering to show Tester first hand the cost of interchange fees.

“We invite our friend Senator Jon Tester to visit Mike's Thriftway in Chester, Mont., where he and Sharla have shopped many times,” Novak said in the release. “We will open our books to him to show him what it is like to run a grocery store where the bank makes twice as much on an order as we do, and the customer pays too much at a time when they don't have any extra to pay.”

The National Grocers Association also said it was “disappointed that a group of senators has chosen to side with the big Wall Street banks over Main Street businesses.

“The same big banks that received billions in taxpayer bailouts are now asking Congress to support another bailout, by trying to delay and kill a rule to reform anticompetitive swipe fees before it's even written,” said Peter J. Larkin [5], president and chief executive officer, NGA.

Retailers are expected to turn up the volume on the issue in the coming weeks, when FMI holds its Public Policy Conference in Washington.

John Motley, a principal in Washington-based consulting firm Policy Solutions — and a former FMI executive who helped craft the association's efforts on the issue — noted, however, that retailers are up against “one of the top 10 most effective lobbies in Washington.”

He said the retail industry actually “got lucky” in having interchange included in financial reform when the big financial players were distracted by other pressures.

On the retailers' side, however, is the potential for Sen. Dick Durbin, D-Ill., to continue to stand behind interchange reform. In addition, President Obama might balk at delays in financial reform.

However, Motley pointed out, Obama could view the interchange piece as a relatively small sacrifice to make if it means leaving the rest of the bill intact. In addition, Motley noted, some of the president's own advisors have cautioned that interchange regulation could be costlier than previously anticipated.