Eye on Hospitality: Debit Card Swipe-Fee Protections at Risk

Eye on Hospitality: Debit Card Swipe-Fee Protections at Risk https://wahospitality.org/wp-content/uploads/2017/03/creditcard.jpg

By Paul Schlienz

The hospitality industry’s hard fought debit card swipe-fee protections are in serious jeopardy due to legislation in the U.S. House of Representatives.

Buried in its more than 2,000 pages, the Financial CHOICE Act, sponsored by Rep. Jeb Hensarling, R-Texas, includes language to hike debit card swipe fees for restaurants, hotels and other businesses.

In the crosshairs of this bill is a 2010 amendment from Sen. Richard Durbin, D-Illinois, that was added to the Dodd-Frank Act, which placed new regulations on banks and other financial institutions. The Durbin amendment limits how much banks and other financial institutions could charge businesses for processing debit card transactions. Prior to these protections, banks could set their own rates for those fees.

The amendment capped debit card fees at approximately 24 cents per transaction while it had no affect on credit cards. Prior to the amendment, the average swipe fee for debits was about 44 cents. That means the measure has cost the banking industry $9 billion in revenue, according to analysts at Goldman Sachs Group Inc.

“For American small businesses, debit swipe-fee protections enacted in 2010 have brought competition and fairness where there was none before,” said Leslie Shedd, vice president of communications at the National Restaurant Association. “Menu prices have remained stable for consumers even though food and labor costs — the top two line items accounting for more than two-thirds of restaurant expenses — have risen sharply in recent years.”

Indeed, a study by economist Robert J. Shapiro shows that debit swipe-fee protections have provided more than $5.8 billion in savings to consumers, while creating 37,000 jobs in the first year alone.

All this, however, is at risk if Hensarling’s Financial CHOICE Act, which overhauls Dodd-Frank, passes. And Hensarling, the powerful chairman of the House Financial Services Committee, is determined to retain the language that would repeal swipe-fee protections. So committed is Hensarling to repealing the Durbin amendment that he specifically asks every Republican lawmaker who wishes to join his committee whether they support ending swipe-fee protections before allowing them on the committee.

“It’s consumers that are caught in the crosshairs,” said Glen Sarvady, an independent consultant who works with credit unions. “This is really just a broader battle about who has the stronger hand to play between the two industries.”

The hospitality industry is not taking this threat sitting down.

This month the National Restaurant Association launched StopTheDebitCardTax.com, to help members connect with their representatives in Congress and voice opposition to the Financial CHOICE Act.

“Even though costs are rising significantly for restaurants, those costs are not being passed along to consumers — thanks at least in part to debit swipe-fee protections,” said Shedd. “Debit swipe-fee protections help small businesses, put money back into the pockets of American consumers, allows for even more free checking, and banks are still able to afford for their swanky vacations. In other words, it’s a win-win for everyone.”