Merchants have been eagerly awaiting the promised savings from a new law that slashed their fees for accepting debit-card payments, but many are finding the early results disappointing.
Business owners, who are receiving their first bills since the new rules took effect on Oct. 1, say in some cases they are now paying more than before – further reducing the already-slim chance that consumers would see lower prices as a result of the changes.
Bill Hardee, owner of the Warehouse Saloon & Billiards in Austin, Texas, said he recently tallied up his savings. The grand total: $1. He figured he paid $74 less on larger debit-card transactions, but that amount was offset by $73 in higher charges that he paid on small purchases.
"I was a little dismayed," said Hardee, who spent more than $1,100 to process card transactions in October.
In some cases, companies that process transactions on behalf of merchants are raising select fees while refusing to pass on to merchants the lower rates now charged by banks, according to letters sent to business owners.
Separately, some merchants that process a large number of debit transactions for small purchases – for example, under $15 in some cases – are seeing those rates rise because Visa Inc. and MasterCard Inc. have eliminated discounts that they had previously offered.
"What's now becoming clear is that the winners are few and far between, as gains for some of even the very largest retailers seem illusive," said Tony Hayes, who specializes in the payments industry at consulting firm Oliver Wyman.
The complaints illustrate an even broader raft of complaints than those raised in a lawsuit filed by retailers on Tuesday. The National Retail Federation and other trade groups that represent merchants filed a lawsuit against the Federal Reserve, challenging the way that the central bank set new debit rates this year. The lawsuit, filed in U.S. district court in Washington, seeks to have the Fed recalculate the rates.
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Looking for more on this topic? We covered the new rules for debit card processing in our November magazine.