| Log In | Register Now
By Alexandra Alper
September 30, 2011 4:42 PM EDT
A government crackdown on debit card "swipe fees" is unlikely to benefit consumers' wallets, as banks seek makeup fees and retailers take the savings down to their own bottom line.
For months, retailers, card network companies and big banks brawled in Washington over the fees and even launched nationwide advertising campaigns. Consumers were often portrayed by retailers as the ones victimized by the billions of dollars in debit card processing fees that banks charge merchants.
On the eve of the mandated lower fees, it appears the skeptics who feared the measure would backfire on consumers were correct.
Bank of America said on Thursday it plans to charge customers who use their debit cards to make purchases a $5 monthly fee.
Representative Barney Frank, co-author of last year's Dodd-Frank financial oversight law, said he opposed including the crackdown in the legislation.
Follow us
He said in an interview with Reuters on Friday that shoppers are unlikely to benefit.
"I regard this as mostly a dispute between two groups of businesses, banks and retailers, and the consumer gets squeezed," Frank said. "The banks will charge you more, and I don't think the retailers are going to charge you less, which is why I didn't want to put it in the first place."
Some retailers are not shy about plans to pocket the savings.
Dave Ratner, founder of Dave's Soda & Pet City chain in Massachusetts, said he will save thousands of dollars annually on swipe fees. Nearly 2 percent of his revenue currently goes to banks for debit and credit card swipe fees.
"This is just a huge relief and is getting back what is mine anyway," said Ratner, who noted that merchants have been powerless to negotiate processing fees with banks until now.
"My customers would laugh at me if I said, 'We are going to give you a dime off if you use a debit card.'"
Senator Dick Durbin, a Democrat from Illinois, led the charge to include the swipe fee limits in Dodd-Frank. He has maintained that the legislation will decrease prices for consumers and help small merchants struggling to meet processing fees that amount to about 400 percent of the processing cost.
Dodd-Frank called on the Federal Reserve to craft the limits, which set the stage for a massive lobbying campaign. Banks and card network companies tried to get the cap set as high as possible, while retailers pressed for a low cap.
The Fed capped "interchange fees" at an average of 24 cents per debit card purchase. The current average fee is 44 cents on a typical debit card purchase of $38.
We value your privacy. Your email address will not be shared.
