Proposed New Debit Card Rules May Not Help Consumers Much

Shops Say Theyll Pass Savings to Customers if New Debit Law Passes

Almost every time Gus Prentzas sells a rose, he feels a pinch in his wallet.

Prentzas, the owner of a flower shop in Astoria, New York, says he has been selling roses for $3 each for over ten years, even as his operating costs have ballooned.

His biggest complaint is directed at MasterCard and Visa, who he says charge him more than $100,000 in debit card "swipe fees" a year. That's why Prentzas, who also owns a gym and a café, is supporting a proposed new law that would limit the amount card companies may charge per swipe.

VIDEO: How banks are trying to work around the new consumer-friendly credit card law.
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"Especially in a flower shop, a lot of orders come over the Internet, so people are paying by credit card or debit card," he says. "We're not asking for a free ride, we want fairness for ourselves and for the banks."

Card Reform Would Change Debit Rules

Business owners around the country are anxiously awaiting a vote in the House of Representatives -- due as early as next Tuesday, according to Congressional sources -- that would overhaul many of the rules that currently govern retailers' relationships with debit and credit card companies. The Durbin Amendment, as it is known, is part of the wider Wall Street reform bill passed by the Senate last month. Shop owners say they will pass on savings from the bill to customers.

Prentzas says if the amendment becomes law, his customers will get lower prices and better service.

"With $100,000 I can hire more people," he says. Prentzas says he would also offer his customers discounts if they pay with cash, a practice that's currently not possible. "If someone wants to come in and buy a $5 dollar bouquet, I'll give them a 10 percent discount."

Debit Savings May Bypass Consumers

Other shop owners offered similar predictions, but experts were skeptical about the direct impact to consumers.

Gerri Detweiler, a credit advisor at Credit.com, says stores have so many costs to juggle, and are already struggling with such low margins, that reducing these fees is unlikely to make much of a difference.

"I feel the retailers' pain and I don't disagree that something needs to be done to bring the fees down," she says. "But I don't know that there will be a direct translation to the consumer."

On the contrary, says Detweiler, consumers may actually be hurt if shop owners start setting transaction minimums, which is another practice the bill seeks to allow.

"Consumers may feel some sympathy on this issue, but if you take away their ability to use their cards anywhere, anytime, they're not going to be happy," she says.

Visa and MasterCard did not return requests for comment.

The Basics of the Amendment

Perhaps because of its implications for consumers, the Durbin Amendment has received a lot of attention for a fairly small piece of the financial reform bill. It only addresses the 1-3 percent that shop owners currently pay as swipe fees on debit cards; fees related to credit cards are not affected.

In laymen's terms, the amendment would:

Direct the Federal Reserve to ensure that debit swipe fees are "reasonable and proportional" in relation to the processing costs. Retailers argue that the costs of processing a swipe are far lower than the 1-3 percent that credit card companies currently charge.

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