Restaurant and retail groups expressed support for a Senate amendment to financial service reform legislation that would limit the fees financial companies can charge on debit transactions.
The amendment, which was introduced by Sen. Richard Durbin, D-Ill., would authorize the Federal Reserve to determine "reasonable and proportional" interchange or "swipe" fees on debit cards imposed on restaurants and other businesses.
The amendment, which was approved by a vote of 64 to 33, also would enable operators to establish a set of minimum and maximum transaction levels for credit cards, and offer discounts to patrons if they pay their bill with cash, check or debit card.
Under the existing regulations, operators cannot set transaction levels, despite the fact that they can lose money on small charge or debit transaction.
The amendment is attached to the Restoring American Financial Stability Act of 2010.
"Interchange fees are often restaurants' third greatest operating expense, behind labor and food costs," said Scott DeFife, the National Restaurant Association's executive vice president for policy and government affairs. "Merchants pay about $48 billion in interchange fees every year."
"Main Street America bailed out the biggest banks in this country not so long ago," said Mallory Duncan, general counsel for the National Retail Federation. "Passage of the Durbin amendment ensures that those same banks won't repay our generosity by undermining the fairness and integrity of the checking and debit-card system."
Advocates of the amendment claim the fees imposed on debit-card transactions are higher than the cost of processing such transaction, and as a result, penalize restaurateurs and other retailers. The NRF estimates the average fee for debit cards runs about 1 percent.
A debit transaction is taken directly from a cardholder's checking account and does not constitute credit, although the fee on debit transactions continues to rise, the NRA said.
The International Franchise Association said on its website the Durbin amendment will improve the financial reform legislation.
Banks and credit unions with $10 billion or less in assets would be exempt. Nevertheless, the amendment would still impact about 65 percent of all debit transactions, Durbin said.
"In a time of recession, when we need small businesses to step up and create jobs, this is a way to move forward," Durbin said.
Contact Paul Frumkin at [email protected].
