Reed Votes to Protect Consumers by Limiting Debit Card Fees

Press Release

Senator Jack Reed (D-RI), a senior member of the Banking Committee, and a key supporter of the "swipe fee reform law," voted to prevent credit card companies and big banks from restoring a "hidden tax" on consumers and small businesses.

"Today's vote is a significant victory for Rhode Island businesses and consumers. We need to make these non-negotiable transaction fees more transparent and subject to the discipline of the free market system," said Reed.

"Swipe fees" or "interchange fees" are costs banks and credit card companies charge small businesses and consumers each time a customer uses plastic to pay for a product. Credit card companies like Visa and MasterCard earn over $16 billion annually from these fees. "Swipe fees" started out covering the cost of processing a credit or debit card transaction, but have grown by over 300% in the last decade, even though processing costs have actually decreased.

These costs add up and get passed on to the consumer. The Food Marketing Institute estimates the average American family annually ends up paying more than $400 in "swipe fees" to banks and credit card companies.

Last July, Senator Reed helped author the Wall Street reform law containing the bipartisan "swipe fee" reform provision. The law requires the Federal Reserve to set fair debit card fees. As a result, starting July 21, 2011, the Fed plans to lower the fees that stores must pay banks each time a shopper swipes a debit card from the current average of 44 cents per transaction down to about 12 cents per transaction.

Small banks with less than $10 billion in assets are exempted from the new fee structure.

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