Yesterday??s Politico ran an op-ed by James C. Miller III, former Federal Trade Commission chairman and Office of Management and Budget director during the Reagan administration, that calls on the Federal Reserve to fix the current debit card swipe fee system:
"The free marketplace is messy. It seldom fits the classic definition of 'perfect?? competition, without at least a couple of asterisks. Sometimes a free market does not ?" or cannot ?" correct a divergence from the competitive norm. When these persist over time or worsen, it is among the few scenarios where there is reason for government to examine, and possibly correct, the cause.
"This is why the Federal Reserve??s proposed rule to limit debit-card 'swipe fees,?? a measure called for in the Dodd-Frank financial reform legislation, is justifiable public policy ?" and overdue. The debit swipe-fee market is just not working.
"In a truly competitive market, the growth we??ve seen in debit swipe fees would be an indicator that banks?? costs of processing debit-card transactions are increasing. But they??re not." Continue reading....
NACS Staff Contact: Lyle Beckwith
In a letter sent Wednesday to Federal Reserve Chairman Ben Bernanke, Senators Kay Hagan (D-NC) and Michael Bennet (D-CO) asked the Fed to "create a meaningful and workable small issuer exemption from the interchange requirements" included in the Dodd-Frank Act.
They cite their concerns with the testimony of Bernanke before the Senate Committee on Banking, Housing and Urban Affairs when he said, "It is possible that because merchants will reject more expensive cards from smaller institutions or because networks will not be willing to differentiate the interchange fee for issuers of different sizes, it is possible that the exemption will not be effective in the marketplace."
The senators go on to point out just how dissatisfied they are with the proposed rule and they note that they supported interchange reform with the understanding that the smaller institutions would be explicitly exempted from limits on interchange fees.
The fact is institutions with under $10 billion in assets are exempt. Retailers know that discrimination of cards based on the issuing bank is impossible in the marketplace. No merchant will turn down a customer or be able to keep up with the different interchange rates on different cards. Your senators need to hear the whole story from you ?" go to "Support Swipe Fee Reform" and make your voice heard. Do not let the banks continue to spin facts that confuse legislators and endanger our hard fought gains in the swipe fee battle.
NACS Staff Contact: Lyle Beckwith
Next week the House is tentatively set to take a vote on a full repeal of the 1099 health-care provision that would require companies to report goods and services transactions valued at $600 or more annually to the IRS. The controversial provision has been something both Democrats and Republicans are willing to reform but the problem is they have to find a way to make up for the lost revenue.
The House bill would pay for the $19 billion loss in government revenue by increasing the amount the government could recapture from people who participate in state health exchanges but earn too much to qualify for subsidies.
Unfortunately, the Senate has already approved a different version of the bill. Their legislation would authorize the Office of Management and Budget to find an equal amount of unused funds, essentially punting the responsibility of coming up with the cash. It has been hard to find agreement on a pay for in the Senate and this could present a problem when trying to reconcile the two bills. Senator Mike Johanns (R-NE) has introduced a bill that is identical to the House version, but it is unclear if the Senate leadership will allow it to be taken up.
NACS Staff Contact: Julie Fields