Consumers are sending mixed views on whether they favor the debit-interchange amendment making its way through Congress as part of the Restoring American Financial Stability Act.
Convenience-store chain Speedway SuperAmerica LLC announced June 3 it had secured 1.7 million customer signatures in favor of interchange reform. Speedway customers in Minnesota, Wisconsin and South Dakota signed their names for the cause.
The National Association of Convenience Stores, which sponsored the petition drive, says it has collected 5.5 million signatures nationwide. It plans to present the petition to Congress in support of the debit-interchange amendment, which would give retailers the option to set minimum amounts for accepting credit or debit cards.
“These fees are hidden, non-negotiable and inflate the prices consumers pay for everyday goods and needs,” Tony Kenney, Speedway president, said in a statement.
However, the results of a consumer survey released June 4 would seem to dispute the association’s contention that customers want the amendment passed. It found that 68% of respondents oppose the proposed law. Cambridge, Mass.-based Lightspeed Research Inc. conducted the online survey of 4,898 consumers nationwide between May 27 and June 1.
Most consumers would shop less often at merchants that put restrictions on when customers may use plastic to pay for goods and services, the survey results suggest. Some 61% of respondents said they would shop at other stores, and 53% said they would stop shopping as often at stores that restricted debit or credit use. Lightspeed used a $10 minimum purchase price as an example.
Under their current rules, Visa Inc. and MasterCard Worldwide can fine acquirers if their merchants impose such minimums.
If the survey findings hold true and the amendment remains in the bill after the House and Senate reconciliation process, such merchants as McDonald’s Corp., Starbucks Corp., Walgreen Co. and Wal-Mart Stores Inc. could be affected the most if they set minimums for card use. Lightspeed’s research indicates those retailers are among the leaders in accepting cards for transactions that are $10 or less.
“Consumers want everything,” David Gordon, Lightspeed senior vice president of business development, tells PaymentSource. “They don’t want to be limited [by minimums], and they don’t want to pay for it either.”
Consumers over the past three years have showed an increased preference for using debit cards to purchase low-ticket items, according to the Lightspeed report. The percentage of all debit card transactions used for purchases less than $20 has increased steadily during the past few years, to 56% of all transactions today from about 50% in 2007, the report notes.
The results of the Lightspeed survey potentially could put a dent in the argument for interchange reform, Gordon believes. “It’s a situation where consumers enjoy the luxury of using plastic, and they don’t want there to be limitations on it,” he says. “They’ve become accustomed to [using plastic]. They enjoy the flexibility of it. It would be tough [to change].”
Meanwhile, hip-hop mogul Russell Simmons sent a letter last week to Sen. Richard Durbin, D-Ill., opposing his amendment, arguing the bill would have a severe affect on unbanked and underbanked consumers that use general-purpose reloadable prepaid debit cards.
Simmons, who founded prepaid card provider UniRush LLC in 2003, wrote a letter to Durbin June 3 about the unintended consequences the amendment could bring. “I am extremely concerned about the potential impact of the amendment, if left unmodified, on the ability of community banks, credit unions or specialist providers to the underbanked to provide card services at affordable rates,” Simmons wrote.
That, in turn, would hurt the poor and the financially underserved because those financial-services providers would raise fees and limit the availability of prepaid cards, he added.
Though financial institutions with less than $10 billion in assets are exempt from the amendment, the credit-union lobby contends the provision would cause havoc in the market and result in credit unions’ cards being less attractive to consumers (
Simmons urged Durbin to prevent that from happening or scrap the amendment altogether.
It remains unclear whether consumers would benefit from lower prices if the amendment stays and the reconciled bill is signed into law. Last week, a report from banking research firm Celent LLC concluded it was a long shot consumers would benefit from the change
