Google, Facebook group asks delay of debit-card swipe fee rules

(Bloomberg) -- Rules capping the fees that debit-card issuers charge to merchants could weaken the security of electronic transactions, said a Washington-based group representing technology companies including Apple Inc., Facebook Inc. and Google Inc.

TechNet, a group that also counts Visa Inc. as a member, called on lawmakers to delay and further study rules that are being written by the Federal Reserve as part of the Dodd-Frank finance-regulation overhaul.

The rules on so-called 'swipe' fees are scheduled to be in place July 21. The group sent letters last week to U.S. senators asking them to support legislation introduced by Senator Jon Tester, a Montana Democrat, to put off the rules for two years.

"As the implementation process has moved forward, it has become clear that, while not the intent, the current proposal is creating unintended and unnecessary consequences such as a very real threat to the level of protection offered to the consumers' personal financial data," Rey Ramsey, the president and chief executive officer of the group, wrote in the April 6 letter.

The group said that the loss of revenue to banks and card networks could lead them to cut costs in the technology systems that protect personal financial information from fraud and identity theft.

"Yawn. Yet another beneficiary of Visa's largess takes great liberties with facts in an attempt to influence the process in the 11th hour."

The cap on debit-card fees was included in a section of Dodd-Frank aimed at cutting transaction costs for retailers that totaled more than $16 billion in 2009, according to the Fed, while also giving merchants the opportunity to choose from at least two independent debit networks to increase competition. Supporters of the limit have said that merchants could pass on their savings to consumers.

12-cent Fee

The Fed in December proposed capping fees at 12 cents a transaction, compared with the current formula that averages 1.14 percent of the purchase price, or about 44 cents. Shares of Visa and MasterCard Inc., which set the fees and pass the money to card-issuing banks, fell more than 10 percent after the Fed's plan was released.

Senator Richard Durbin of Illinois, the No. 2 Democrat in the Senate who wrote the Dodd-Frank provision, has said he will oppose a delay.

Retail groups representing companies including Target Corp., Home Depot Inc. and Wal-Mart Stores Inc., along with grocers and small business owners are lobbying to preserve the rule and its timing. They said the fees represent one of their largest monthly expenses and that reducing the cost will give them freedom to cut prices for consumers.

No Vote Scheduled

Tester filed his delay plan as an amendment to a small business bill on the Senate floor. The amendment has not been scheduled for a vote and Tester said last week it may not get one.

"If a better opportunity is the next bill we can get on, we'll get it on that one," Tester told reporters.

Among others who've backed calls for delay in recent weeks are the National Association for the Advancement of Colored People, the National Community Reinvestment Coalition, community banks and credit unions.

The TechNet letter was sent to senators from the six states where the group operates, as well as Senator Jay Rockefeller, a West Virginia Democrat who is chairman of the Senate Commerce Committee. Other recipients included California Senators Barbara Boxer and Dianne Feinstein, both Democrats; Massachusetts Senators John Kerry and Scott Brown, a Democrat and Republican respectively; and Texas Senators John Cornyn and Kay Bailey Hutchison, both Republicans.

Commenting on the letter today, Brian Dodge, a spokesman for the Retail Industry Leaders Association, a group the represents large retailers, said in an e-mail: "Yawn. Yet another beneficiary of Visa's largess takes great liberties with facts in an attempt to influence the process in the 11th hour."