National Restaurant Association and Restaurant Law Center Request Fed Board Lower Debit Card Interchange Fees

Washington, D.C. – The National Restaurant Association and the Restaurant Law Center (RLC) yesterday, submitted comments in response to the Federal Reserve System Board of Governors’ “Debit Card Interchange Fees and Routing” Notice of Proposed Rulemaking (NPRM). In the filing, the organizations express support for the Board’s duty to review debit card interchange rates, but also call for the body to lower the rate below its target and to eliminate additional fees so that the new rate is fair and equitable for debit card issuers, restaurants of all sizes, and diners.

In the comments, the organizations outlined why the Board should:

• Consider the impact an updated interchange fee cap would have on small-ticket merchants, like restaurant operators
• Decrease the base component of the interchange fee cap to 6 cents, instead of the proposed 14.4 cents
• Eliminate the ad valorem component of the interchange fee cap
• Reduce the fraud-prevention adjustment from 1 cent and condition this component of the interchange fee cap on demonstrated issuer effectiveness
• Establish audit and enforcement plans to ensure its proposed biennial automatic update to the interchange fee cap remains reasonable and proportional to issuer costs moving forward

The Fed Board of Governors is required by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act to review debit card interchange fees biennially and evaluate if the fees remain reasonable and proportionate to issuer costs. The NPRM is in response to its most recent evaluation.

According to data from Circana/CREST, among restaurant customers who paid the check using either a credit/debit card or cash in 2023, 70% said they used a credit or debit card. That was up from 53% in 2018.

“Since the pandemic, restaurant operators have seen a large increase in payments made via credit and debit cards in comparison to cash,” said Brennan Duckett, director of Technology and Innovation Policy for the National Restaurant Association. “The more they swipe cards, the more it costs operators to run their restaurants. The Board should set the interchange fee caps in a way that ensures small-ticket merchants, like restaurants, are not unfairly impacted.”

The comments also focus on lowering the ad valorem component of the interchange fee cap, because the Board found that between 2011-2021, financial institutions foisted two-thirds of all fraud losses onto merchants and consumers. In light of these findings, the Association highlights a significant and immediate need to reduce the proposed ad valorem component or eliminate this component altogether.

“These days, most people pull out a debit or credit card to make even the smallest purchases, and for each swipe of a card, restaurant operators pay fees that add up with each transaction,” said Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association. “The weight of credit card fees gets heavier each year because there is no regulation on them, but the Fed has the responsibility to ensure that debit interchange fees remain reasonable. This is their chance to provide a small bit of relief from these costs for restaurant operators and consumers.”

Read the full National Restaurant Association and Restaurant Law Center joint comments here.