National Restaurant Association Asks Congress To Fix Broken Swipe-Fee System

Nov. 30, 2012

The National Restaurant Association (NRA) says Congress should scrutinize the problems surrounding the way credit-card companies charge restaurateurs, and other small-business operators, swipe fees on credit-card sales.

Scott DeFife, the NRA's executive vice president of policy and government affairs, said the debit-card fee reforms enacted in 2010 and implemented last year were an important first step, but lack of competition and transparency on credit swipe fees continues to threaten the health of the industry. He added that legislators should examine the broken market.

"In the U.S., credit-card swipe fees average 2 to 3 percent of each transaction - a level close to the profit margins of many restaurants," DeFife wrote in an op-ed appearing in the Nov. 20 edition of The Hill's Congress Blog. "Credit-card swipe fees have tripled since 2004 despite technological improvements that should have driven costs down. And, rates in the U.S. are 7 to 8 times higher than they are in Europe, even though the volume of transactions here is the highest in the world."

DeFife stated that because two major card companies - Visa and Master Card - control 80 percent of the market, they don't have to compete on price.

"The dominant card companies together set rates for swipe fees on behalf of the banks that sponsor their cards," he wrote. "And the rates are nearly impossible to figure out. Currently, Visa has 60 different fee categories and MasterCard has 243.

"Congress took a good first step in 2011 when it said that debit fees need to be reasonable and proportional to the actual cost of processing the transaction," he continued. "We are still working to ensure those regulations are properly implemented, but now it's time to start examining credit-card fees. We need transparency and competition to make the market work like it should, and we need a clear and predictable system so restaurant operators can understand what they are paying and why they are paying it."

On Nov. 27, 10 retail groups, including the National Restaurant Association, appealed a judge's decision to proceed with a preliminary settlement in a long-running antitrust case merchants filed against Visa and MasterCard over anti-competitive swipe-fee rates. There is no word yet on when the appeal will be heard. In the meantime, the NRA is reminding its members to continue to be cautious of third-party collections agents since it is still too early for merchants to join any sort of claims process.