As Banks Rally, the NRF Escalates the Debit Card Interchange Lobbying War

With bank opposition to the Durbin Amendment growing, the National Retail Federation on Wednesday launched what it calls a major, 60-day advocacy campaign to “preserve swipe-fee reform” for debit cards.

The multipronged effort, according to an NRF news release, includes an “intensive grass-roots” campaign to mobilize retailers through NRF affiliates and state chapters, and a June “fly-in” in which retailers will converge on Washington, D.C., to tell members of Congress why they should allow the Durbin Amendment’s provisions to go through as planned. Other components include print and radio advertising tailored to audiences both inside and outside the Beltway, social-media and other Internet videos, and public relations and placement of op-eds and letters to editors.

“Our job over the next two months is to ensure that swipe-fee reform takes effect as planned, and consumers get to enjoy all the new benefits,” Matthew Shay, president and chief executive of the Washington-based trade group, said in the release.

An NRF spokesperson declined to say how much the federation would spend on the campaign. He noted in an e-mail, however, that Shay said Wednesday “that our total spending on the issue of swipe fees has already been ‘well into the seven figures’ and that this campaign will add hundreds of thousands to that.”

The NRF and numerous other merchant groups strongly support the Durbin Amendment, part of last year’s Dodd-Frank financial-reform bill, because it calls for big debit card interchange cuts and more transaction-routing freedom for card acceptors. The preliminary proposal by the Federal Reserve to implement the amendment calls for cuts of 70% or more for issuers with $10 billion in assets.

Banks, which as debit card issuers receive interchange, just as vehemently oppose the amendment and say that if it remains law, they’ll raise account fees and cut perks such as debit card rewards to compensate for the lost revenues. Banks and their payment card network allies have been lobbying heavily in recent weeks in support of bills that would delay the measure’s implementation by one to two years. The Fed missed an April 21 deadline to have its final rules out but has said it would have regulations in place by the law’s mandated July 21 implementation date.

When asked for comment about the NRF initiative, a spokesperson for the Electronic Payments Coalition, a lobbying group of banks and networks, said by e-mail that the EPC had been running its own “aggressive campaign” since February. “At the end of the day, members of Congress get that the Durbin Amendment is terrible policy that will harm our country’s community financial institutions. This has to be slowed down and studied. I have heard no rational reason to rush into this, outside of Home Depot’s $35 million profit projections for the year as a result of July implementation.” (The Home Depot Inc.’s chief financial officer in February said that based on the Fed’s draft proposal, the estimated benefit to the home-improvement chain could be $35 million annually.)

Predictably, each side is accusing the other of spreading misinformation. The EPC spokesperson claims the NRF is “hiding behind questionable front groups like American Family Voices and Americans for Job Security with attack ads full of lies.” The NRF spokesperson responds: “We’ve seen the American Family Voices/Americans for Job Security ads on swipe but we are not involved with those, so that is completely unrelated to this.”

In the NRF’s release, senior vice president and general counsel Mallory Duncan said, “The banking industry has engaged in a massive multimillion-dollar campaign of misinformation and threats intended to deprive consumers of the savings they are entitled to under reform. We’ll work aggressively to set the record straight and keep banks from taking this landmark reform away from the Main Street retailers who are the lifeblood of our economy.”

In a lengthy article published April 28, The Huffington Post online newspaper detailed the fierce corporate lobbying fight in Washington over debit card interchange regulation. Banks have 118 ex-government officials and aides registered to lobby against the Durbin Amendment while retailers have at least 124 hired guns defending it, the publication said. The EPC gave $2 million to members of Congress and the two major parties in the first quarter.

Meanwhile, merchant acquirers are trying to make hay out of Durbin. In a Wednesday news release, Heartland Payment Systems Inc. chairman and chief executive Robert O. Carr said the average Heartland restaurant merchant would save $1,992 under the Fed’s proposed rules. But Carr, who will head a payments panel at a National Restaurant Association trade show in Chicago next weekend, urged merchants to assure their processors pass the full decrease in interchange costs to them. “There are billions of dollars at stake … but not all providers will pass along the savings,” he said. The release says, “one processor is telling Wall Street analysts it will keep more than $300 million of the Durbin savings,” but didn’t identify the company. Carr was not available for comment late Wednesday.

The Durbin Amendment does not require acquirers, who under the current bank card interchange system are one ones that technically pay interchange fees to card issuers, to pass the savings on to their merchant clients. Acquirers normally assess their full interchange costs to merchants, but under many acquirers’ pricing plans the actual expense can be hard for merchants to discern.

At the end of the chain, the NRF is insisting that its members will pass Durbin-related savings on to consumers.