Financial Regulatory Reform Unfairly Affects Retailers and Leaves Excessive Credit Card Swipe Fees Untouched 

Sweeping financial regulatory reform legislation under consideration in the U.S. House of Representatives would unfairly affect industries with no role in the recent financial meltdown, yet fails to bring meaningful reform to excessive credit card interchange fees harmful to retailers and consumers, according to the Retail Industry Leaders Association (RILA).

The legislation, known as the Wall Street Reform and Consumer Protection Act (H.R. 4173), is before the House of Representatives this week.

“We understand that the objective of instituting certain corporate-governance reforms is to ensure that any of these practices that may have contributed to the financial meltdown last year are not repeated.  Unfortunately, the legislation’s new corporate-governance restrictions go well beyond financial institutions and affect all publicly traded companies, including those in the retail industry, which had no role in the recent financial crisis,” said John Emling, senior vice president for government affairs in a letter to House lawmakers.  

RILA raised specific objections to governance provisions regarding proxy access and shareholder votes on compensation.

“RILA member companies have built strong relationships with their shareholders, and through positive dialogues between shareholders and company directors and management, RILA members have listened and responded to many shareholders concerns and proposals to improve corporate governance in recent years,” said Emling.

The legislation also fails to seize the opportunity to bring transparency and competition to fees known as Interchange fees, levied on retailers by the credit card industry.  Interchange fees, also known as swipe fees, are imposed under the pretense of processing credit and debit card transactions.  However, these fees have tripled in the United States since 2001, to $48 billion in 2008, despite advances in technology that have reduced other comparable transactional costs.  Today, for most retailers, the cost of processing paper checks is less than the cost of accepting credit and debit cards.

“This legislation is an historic opportunity for Congress to help our marketplace function more efficiently and avoid some of the imbalances that have occurred in recent years.  However, in its current form, H.R. 4173 has missed that opportunity,” added Emling. 

RILA’s letter to lawmakers also raised objection to language that would treat retail gift cards as financial products and thus regulated under a Consumer Financial Protection Agency (CFPA).  Retail gift cards are today’s version of gift certificates.  They simply do not warrant the regulation of CFPA and retailers should not be subject to the associated compliance burdens and costs.

Complete letter text can be viewed here.

RILA is the trade association of the world’s largest and most innovative retail companies.  RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.