Now It’s the States’ Turn to Grapple With Swipe Fees

In the latest round in the fight between retailers and financial institutions over interchange fees, a number of states are considering limiting the surcharges retailers can impose on consumers for paying with credit cards. Associations on both sides are keeping close watch.

Much of the recent action involving interchange fees on credit- and debit-card payments has been at the federal level—either in Congress or in courtrooms.

But with a soon-to-be-finalized settlement giving retailers more leeway to charge consumers for using a credit card (versus a debit card or cash), some states are considering legislation that could limit that leverage. More details:

The background: Interchange fees on transactions, also known as “swipe fees,” are a common source of tension between financial institutions and retailers, in part due to the difference between debit charges (paid by the consumer) and credit charges (paid by the retailer). Efforts at reforming the fees have had degrees of success at the federal level: Congress passed a cap on debit-card fees in 2010, and a massive class-action settlement on credit-card fees was agreed on last year by a group of retailers and card issuers. While some retail organizations have criticized the settlement, in some cases backing out entirely, the deal has a wide reach, affecting millions of merchants.

The switch to the states: Banking and credit-card groups haven’t actively been organizing a state legislative push to prevent retailers from charging consumers more for using credit cards, but there’s been one nonetheless, partly in reaction to the class-action settlement, Bloomberg reported. “Legislators heard about it from consumers, read about the settlement, and pushed it,” Trish Wexler, a former spokesperson for the Electronic Payments Coalition, told the wire service.

One flash point: The Utah Bankers Association has already succeeded in pushing for a law that bars retailers from placing surcharges on credit purchases in the state; the association cited the settlement as it advocated for the measure. The Utah Retail Merchants Association, meanwhile, opposed the law, noting that federal regulations allow retailers to offer discounts for paying with debit cards or cash, which has a similar effect to imposing a surcharge on credit-card purchases. “I have a hard time getting my head around why giving a discount is OK, but surcharging is illegal,” said the retail association’s David Davis to Bloomberg.

Utah is the only state to pass an anti-surcharge bill thus far. According to the American Bankers Association, 20 state legislatures have such a measure under consideration.


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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