Capped debit card fees are a gift to retailers

June 17, 2010

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YOUR SUPPORT of the US Senate’s version of the financial reform bill, which instructs the Federal Reserve to unilaterally cap debit card interchange fees, is a mistake (“Take a swipe at card fees,’’ Editorial, June 9). The 200 banks and 225 credit unions of Massachusetts and millions of consumers will face unintended consequences: higher big-box retailer profits and less convenience and higher costs for consumers.

The amendment ignores the benefits merchants receive from the debit card system: guaranteed payments, no handling of cash, and higher sales volume. Conversely, the language ignores significant costs borne by banks and credit unions: billions of dollars invested in a worldwide network and fraud prevention, the issuance of cards and replacing those cards, and making consumers whole when weak security at retailers results in data breaches.

Retailers would be able to discriminate against individual cards and set limits (minimum and maximum) per transaction. For states such as Massachusetts that offer food stamps and payments through debit cards, costs would increase and consumers could be forced to spend more to meet retailers’ arbitrary caps.

The merchants who have pushed for this action have sold it as a benefit to the nation’s consumers. Yet there is no requirement to pass along savings to consumers, nor for the retailers to be responsible for any fraud, liability, or negligence of their own doing. The retailers are receiving a big gift, and consumers, local banks, and credit unions will suffer the consequences.

Daniel F. Egan Jr.
Massachusetts Credit Union League

Daniel J. Forte
Massachusetts Bankers Association

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