California Debates Debit Card Check Out Fess

Over the past few months, a standoff of sorts has been developing between California consumers and some of the state’s retailers. At issue is the swipe fee some retailers charge everytime a customer chooses to pay with his or her debit card. Consumer advocates claim that these retail businesses are taking advantage of what many see as a gaping loophole. According to California law, businesses are prohibited from applying checkout fees to purchases paid for with a credit card, but as of yet debit cards are excluded.

On the other side of the fence, the businesses are claiming that the move is necessary to protect tight profit margins- especially since they are charged high interchange fees by payment processors for all purchases made with a debit card.

New legislation, however, is poised to change the playing field. The recently approved Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, includes the Durbin “swipe fee” ammendment, which requires that interchange fees be “reasonable and proportional” to the payment processing costs incurred, and empowers the Federal Reserve to set the fee cap.

With this new legislation in place, retailers will lose some of their justification for holding on to these fees. But we’ll have to wait until all the dust settles before we can tell what the impact will be.