Consumers Will Pay for Merchant Windfall
The U.S. Senate has voted to add an amendment to financial regulatory reform that will arbitrarily limit the costs that merchants pay to accept debit cards, and eliminate important rules that are in place expressly to protect consumers.
If this amendment is included in the final bill, consumers and small financial institutions will be the ones to pay.
Click on the links below to expand them and read more about each issue.
Make you pay more for your debit cards.
Congress has proposed that the Fed determine what retailers pay to accept debit cards. As a result, if these fees are forced down, retailers will profit — and consumers will pay.
- Increased fees
- No more free checking
- Reduced or eliminated rewards programs
- Elimination of debit programs of small banks and credit unions
In other words, you will pay more for your debit card so that big retailers can catch a break on what they pay. This is precisely what happened in Australia when regulators set prices on card acceptance fees. Consumers paid more at their banks, and merchants increased their profits by hundreds of millions — with no evidence that consumers received any break at the register.
When retailers accept cards, they receive guaranteed, instant payment; increased sales; and reduced administrative costs. They make more money in the end — and should pay for this service. But retailers want you to foot the bill for this business expense, and that's not fair.
Force consumers to carry cash at all times.
Those that don’t have enough cash would have to buy more than they wanted in order to complete the transaction — or would be forced to carry enormous amounts of cash in the event that the merchant imposes a maximum payment.
Allow retailers to discriminate against you at the register.
Retailers could discriminate against you and make it very difficult to use your debit or credit card at their stores, through multiple avenues:
1. Retailers could set unrestricted minimum or maximum amounts to use a debit or credit card — and, not have to alert the consumer to their policy until the very last minute. This means you'll have to carry around cash at all times, or be prepared to buy more than you wanted in order to reach the minimum amount.
- Do you have a prepaid card?
- Receive state benefits on those cards?
- Get your payroll on a prepaid card?
THESE NEW RULES APPLY TO YOU, TOO!
2. Retailers could make you pay more for YOUR credit card if it's not the kind of card they like. Affinity cards — like for charities or your University — rewards cards, and others are all disliked by retailers. You may arrive at the register to learn that you will not qualify for certain discounts they are offering to other shoppers.
Force consumers to turn to large, national banks for debit card services.
If interchange revenue were artificially limited by the government, the millions of consumers who use small financial institutions would be forced to turn to large, national banks for their debit cards — further consolidating the financial system.
Harm lower income Americans who use debit cards for food stamps or other assistance.
Imposing a minimum payment would unfairly harm Americans who depend on government assistance like food stamps and child support, which are often issued on prepaid debit cards — forcing them to buy a minimum amount just to use their cards, thereby adding to their financial difficulties.
Allow merchants to falsely advertise.
A merchant could bait customers into the store — one of the key benefits of card acceptance — and only inform the customer of minimum and maximum limits on that card when he or she arrives at the cash register.