Natural Foods Merchandiser

Senate passes swipe-fee reform

Independent grocers and supermarkets are praising a provision in the financial reform bill that regulates interchange fees on debit card transactions.

TheDodd-Frank Wall Street Reform and Consumer Protection Act directs the Federal Reserve to set interchange fees for debit card transactions that are “reasonable and proportional” to the costs incurred by the banks that issue the cards. Intercharge fees are the fees the card issuers collect from merchants as a percentage of each transaction.

The bill also allows retailers to set a minimum of $10 for credit card transactions and offer discounts and incentives for paying cash.

Transaction fees average about 2 percent in the U.S. “It’s sure been a long time coming,” said Kimberly Hallinan, chief financial officer of Santa Cruz, Calif.-based New Leaf Community Markets. “The costs of processing electronic payments have been going up and up and taking a bigger and bigger bite out of our profits.”

“The expense to retailers on merchant card fees has continued to grow over the past years. Retailers pretty much had two choices in managing these fees, margin erosion or passing the costs on to their customers,” said Corinne Shindelar, CEO of the Independent Natural Food Retailers Association. “The changes to the interchange fees and rules allows retailers the ability to make new decisions on how they want to involve their consumers in working with them to control some of these expenses.”

Shindelar called the new legislation “a step in the right direction. This allows the retailer to decide what will work best in their market for educating their consumers via offering incentives for cash or implementing a minimum transaction level for acceptance of a credit card.”

Hallinan said New Leaf will take some time before deciding new policies about card limits and incentives.

“It will require more thought so we don’t alienate our customers,” she said.
The Food Marketing Institute estimates that consumers pay more than $50 billion a year in interchange fees to credit card companies and banks.

“These fees represent the only completely uncontrollable cost for retailers,” said Leslie Sarasin, FMI president and CEO. The legislation changing interchange fees “is a long-fought victory for supermarkets and their customers across the country,” Sarasin said.

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