Announced on May 13, The National Restaurant Association, along with the Restaurant Law Center (RLC), has formally requested that the Federal Reserve Board of Governors lower debit card interchange fees. In response to the latest Notice of Proposed Rulemaking (NPRM) titled “Debit Card Interchange Fees and Routing,” the organizations have submitted comments advocating for a fairer fee structure that would benefit restaurant operators and their customers.
Key Points of the Proposed Changes:
- Impact on Small-Ticket Merchants: The Association highlights that an updated fee cap could significantly impact small-ticket merchants, particularly restaurants.
- Reduction in Fee Cap: They propose decreasing the base interchange fee cap from the proposed 14.4 cents to 6 cents.
- Elimination of Ad Valorem Component: They call for the elimination of the ad valorem (percentage-based) component of the fee.
- Fraud-Prevention Adjustment: The Association suggests reducing the fraud-prevention adjustment from 1 cent and tying it to the effectiveness of the issuer’s fraud prevention.
- Audit and Enforcement: They recommend establishing audit and enforcement plans to ensure the interchange fee cap remains reasonable and proportional to issuer costs in the future.
Why This Matters: The Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandates that the Federal Reserve review debit card interchange fees every two years. The goal is to ensure these fees are reasonable and proportional to the costs incurred by issuers.
Data from Circana/CREST indicates that 70% of restaurant customers paid with a credit or debit card in 2023, up from 53% in 2018. This shift highlights the growing financial burden on restaurant operators due to card payment fees.
Industry Insights: “Since the pandemic, there’s been a noticeable rise in card payments over cash,” said Brennan Duckett, Director of Technology and Innovation Policy for the National Restaurant Association. “Increased card usage means higher costs for restaurant operators. It’s crucial that the Board sets fee caps that protect small-ticket merchants like restaurants from unfair costs.”
The comments also emphasize the need to reduce or eliminate the ad valorem component. Financial institutions have passed two-thirds of all fraud losses onto merchants and consumers, underscoring the need for a fairer fee structure.
Call to Action: “Every card swipe costs restaurant operators, adding up significantly over time,” said Sean Kennedy, Executive Vice President of Public Affairs for the National Restaurant Association. “With no current regulation on credit card fees, it’s up to the Fed to ensure debit fees remain fair. This is an opportunity to provide some financial relief to restaurant operators and their customers.”
The full joint comments from the National Restaurant Association and the Restaurant Law Center can be read here. For OnionBusiness.com readers, understanding these proposed changes is crucial. The restaurant industry’s health directly impacts the broader food supply chain. Lower interchange fees could mean more financial stability for restaurants, potentially leading to more consistent and increased demand for products. It’s a vital moment for all involved in the food industry to support measures that alleviate unnecessary costs for restaurant operators.
