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64 to 33

By John Eichberger

In case you haven’t heard, on May 13, the Senate passed, by a vote of 64 to 33, an amendment that would dramatically reform the current swipe fee system —a real victory for convenience retailers and consumers! (For further details and a list of senators who voted in favor of the amendment, see "Capitol Punishment.")

We can briefly revel in this accomplishment, but sadly, this is only one victory in the ongoing battle against the credit card industry and their member banks.

The amendment, championed by Senate Majority Whip Richard Durbin (D-IL), is included in sweeping financial reform legislation that still needs final approval in the Senate. If it’s approved, then the bill must be combined with similar legislation previously passed by the House of Representatives that does not contain language pertaining to swipe fees.

Keeping Durbin’s amendment intact in the combined House-Senate financial reform bill will require another round of enthusiastic and dedicated effort from all retailers. Watch for notifications from NACS to call your representatives and senators again...and again...and again. Repetition is the recipe for success. Don’t be shy — make sure your elected officials are educated and informed about the negative effect that swipe fees have on your business, and make sure you know how they intend to vote!

It is also critical that we let our customers know how this issue has progressed. We’ve delivered to Capitol Hill nearly four million signed petitions from convenience stores across the United States to ask Congress to bring fairness to a broken system. Our consumers are critical allies to our campaign and we must keep them engaged. NACS will be communicating with you directly with suggestions for further engaging your customers.

We have come a long way together and our industry is more united than ever. We must keep up the pressure to ensure that the Senate continues to support our provisions and we must force the House to accept them without diluting their effect on the system.

Thank you again.


The Return of the Death Tax
By Corey Fitze

They say there are two certainties in life: death and taxes. So without sounding too morbid, you better plan on exiting soon if you want to pass on your family business to your heirs. We’re obviously not serious, but the devastating effect the estate tax could have on your family-owned and -operated business starting next year is very real. While the estate tax disappeared on January 1, 2010, it’s scheduled to return with a vengeance on January 1, 2011 —unless family businesses weigh in with their senators.

Because of a sunset provision attached to the law, the estate tax has gradually phased down since 2003 and was completely eliminated this year. However, the law also provided for a return of the original tax rate in 2011 —a 55 percent rate with an exemption of only $1 million per person.

Senators are starting to pick sides in this debate and NACS is getting in the mix to protect your long-term interests. While we want the estate tax to disappear forever, it’s unrealistic —especially in today’s political environment. With a national debt of $13 trillion (for a sobering reality, visit usdebtclock.org), it is highly unlikely Congress will act to permanently repeal the estate tax. However, failure to do anything this year on this issue is a slap in the face to America’s small businesses.

On the side of small business is a group of senators led by Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ), who are pushing legislation supported by NACS that would establish a permanent estate tax rate of 35 percent with an exemption of $5 million per individual (a figure that will be indexed for inflation). This is a solid compromise that most of the business community supports.

Opposition to estate tax reform is growing, and some reports indicate that a majority of Democrats may oppose the Lincoln-Kyl proposal. There are clearly some who think a return to the 55 percent tax rate is the preferred outcome. Meanwhile, on December 3, 2009, the House passed a bill by a vote of 225 to 200 that sets the rate at 45 percent and the exemption at $3.5 million, not indexed for inflation.

If you care about the taxable rate on your business —even after you die —you must contact your senators. To help urge the Senate to support the Lincoln-Kyl reform proposal, NACS has prepared a draft letter that you can send to your senators, asking them to support reasonable estate tax reform. Take action now: Visit nacsonline.com/grassroots.

Contact NACS Government Relations Director Corey Fitze at cfitze@nacsonline.com or (703) 518-4283 for talking points or more details.


One Voice: Dave Carpenter
I used to think that advocacy wasn’t my responsibility —somebody else would take care of it. Now, after lobbying several times with NACS on Capitol Hill, I know things won’t change if I sit back and assume the job isn’t mine to handle.

I’ve visited with my representatives and senators in D.C. and in Iowa, and I have been straightforward when sharing my views and information. It is critical not only to tell them why you care about an issue, but also to show them —I’ve even shown them my P&Ls to make a point.

Recently I represented our industry by testifying before Congress on interchange reform. It was an incredible experience —one of those things in life that not many have the opportunity to do. But we don’t all need to testify on Capitol Hill to make a difference.

In response to a recent NACS call to action, I e-mailed all of my office employees and every one of my stores and asked them to call our senators to encourage their support of two interchange reform amendments. I asked everyone to respond to me when they had completed the request and learned that our small company had placed an impressive 36 phone calls! It didn’t take much effort and people appreciated being asked to participate.

We have an industry that can affect change —if people participate. It’s simple to do: Design a basic system you can implement when you receive a call to action from NACS.

We will see movement on our big issues if we commit to engaging our elected officials, make our views known and hold them accountable.

Dave Carpenter
President, J.D. Carpenter Companies Inc.
Make your voice heard at nacsonline.com/grassroots.


One Versus Many
By John Eichberger

On April 28, NACS Vice Chairman Dave Carpenter, the president of J.D. Carpenter Companies Inc., which operates six ShortStop Convenience Stores in Des Moines and eastern Iowa, testified before the House Judiciary Committee in support of the Credit Card Fair Fee Act (H.R. 2695), legislation that would allow retailers to negotiate with Visa and MasterCard on rates and terms of acceptance.

As the owner of both a small chain of convenience stores and the owner and board member of Liberty Bank Iowa (a community bank that issues its own Visa credit and debit cards), Carpenter presented the committee with a unique perspective.

"Because of my roles as a retailer as well as a co-owner of a community bank, I am in the unique position of understanding the effect that runaway card fees have on convenience stores, as well as the negligible impact of payment card operations on community banks’ profitability," Carpenter told the committee.

The House Judiciary Committee narrowly approved an identical version of this legislation last Congress by a vote of 19 to 16, gaining the support of 10 Democrats and nine Republicans. However, the committee membership has changed since the previous Congress and the efforts of our opponents have intensified since that committee vote. As a result, it was critical for Carpenter to accurately present the NACS perspective and competently respond to committee member questions. Doug Kantor, partner at Steptoe and Johnson and legal counsel to NACS and the Merchants Payments Coalition, joined Carpenter in testifying on behalf of convenience retailers.

Here’s a quick snapshot of the tough remarks made by committee members and deftly fielded by Carpenter and Kantor:

  • Ranking Republican Lamar Smith (R-TX) said he believes that lower fees would not be passed through to the consumer and he does not believe that Congress should act.
  • Representative Jim Sensenbrenner (R-WI) claimed retailers don’t have to accept credit or debit cards and that, through the petitions in convenience stores, retailers are misleading consumers by claiming savings will be passed on to them.
  • Representative Debbie Wasserman-Shultz (D-FL) claimed Carpenter has a conflict of interest because of his two perspectives and wanted to know why the legislation does not require a 100 percent pass-through of savings to consumers.
  • Representative Jason Chaffetz (R-UT) attacked Carpenter for not offering cash discounts at his stores and argued that if retailers really wanted to pass savings on to their customers they would simply offer cash discounts.

Judging from many of the committee member comments, the banking industry has been working hard to undermine this legislation and their tactic is clear —convince Congress that retailers will not pass any savings on to their customers.

But Carpenter and Kantor were not alone in advocating for consumers and retailers in support of the bill. In direct response to questions about why this pending legislation does not mandate the pass-through of reduced fees to consumers, Ed Mierzwinski, testifying on behalf of U.S. PIRG, a consumer advocacy organization, said that competitive markets will ensure consumers benefit from credit card/retailer negotiations.

"The market doesn’t require Congress to order that kind of result because that kind of result happens anyway...I believe that the retail industry is placed where the market works. I believe the interchange is a place where the market doesn’t work, so that’s the reason why it is not necessary to include that kind of provision."

Carpenter concluded his testimony with a message for those that think the free market should take care of this situation without government intervention: "I am an entrepreneur and believe in free markets. And what I know is this: Legal or not, the interchange market is not free. It is rigged to guarantee big money for the largest banking institutions, leave banks like mine the leftovers from their feast (at best), and tighten the noose on businesses like ShortStop as much as they can without killing us —though sometimes it proves fatal."

As of press time, information was not available as to when the Judiciary Committee will vote on the Credit Card Fair Fee Act. However, because the committee chairman, Representative John Conyers (D-MI), is the author of the bill, NACS is hopeful further action will be forthcoming.