There was a time not so long ago when restaurants had a serious aversion to customers swiping their debit cards. That seems almost comical now. Cash might be king but it hasn’t sat on the throne in ages.
Leading up to 2010, as the National Restaurant Association says, the cost of processing a debit transaction ballooned from zero cents to around 44 cents per transaction. In the foodservice world, where margins are universally razor thin, this was a cost small startups and even growing companies simply couldn’t handle. Restaurants also had to sign restrictive contracts with card companies if they wanted to accept debit cards, which, as the NRA points out, “prevented our members from negotiating a lower price, accessing an alternative processing network, and offering customer discounts for use of cash, checks and debit cards without penalty from the card networks.”
Seven years ago, debit-swipe fee reform came in the form of regulations that kept the fees “reasonable and proportional.” The average today hovers between 24 and 27 cents per transaction. And, once again in the words of the NRA, “the reforms also allow merchants to offer customer discounts for use of cash, checks and debit cards without penalty from the card networks. Importantly, restaurants are now able to choose from at least two independent payment networks, which injects much needed competition into the market.”
Last year, in Financial Services Committee Chairman Jeb Hensarling’s Financial CHOICE Act, this issue bubbled to the surface again. Disturbingly, the word repeal is what carried it there.
This week, as the American Bankers Association seeks a repeal of the Durbin Amendment, the NRA is making sure its stance on debit swipe-fee protection is heard. Through Facebook, Twitter, display, pre-roll and search ads in the Washington, D.C. area, the NRA will try to reach lawmakers and convey the need to halt debit card tax. The NRA is also launching a social media campaign directed at bankers.
“The big banks are sitting on piles of cash already—enough to pay for million-dollar raises and swanky conferences. They don’t need Congress to pass a debit card tax paid for by American consumers that only benefits them,” says Leslie Shedd, vice president of communications for the National Restaurant Association, in a statement.
They also sent a letter signed by all state restaurant associations to the House detailing the importance of keeping the legislation.
Here’s the entire letter:
March 20, 2017
Dear Members of the U.S. House of Representatives:
On behalf of the restaurants, customers, and employees in your districts, we ask that you oppose any effort to repeal debit swipe-fee protections. Our members fought vigorously to achieve these protections seven years ago to bring a degree of competition, transparency and fairness where there was absolutely none before. A repeal of debit-swipe fee protections was included in Financial Services Committee Chairman Jeb Hensarling’s Financial CHOICE Act last year.
The restaurant and foodservice industry consists of over a million locations nationwide with estimated sales of $799 billion accounting for roughly 4% of our national GDP. As the nation's second-largest private-sector employer, we are an engine of entrepreneurship and job creation that plays a vital role in helping the economy in good and difficult times. Our members, who operate under low profit margins of 3 to 6 percent, must work every day to keep costs low for our customers.
For many restaurants, swipe-fees account for one of their largest costs after labor and food. In the years leading up to 2010, our members saw the cost of processing a debit transaction skyrocket from zero cents to approximately 44 cents per transaction. If restaurants wanted to accept debit cards, they were forced to sign restrictive contracts with card companies. This prevented our members from negotiating a lower price, accessing an alternative processing network and offering customer discounts for use of cash, checks and debit cards without penalty from the card networks.
Due to debit swipe-fee reform, the Federal Reserve was required to adopt regulations that would result in debit swipe-fees that were “reasonable and proportional” to the actual cost of processing a transaction, not the inflated percentages card companies charged. Passage of the debit swipe-fee protections reduced debit swipe-fee rates to today’s average between 24 and 27 cents per transaction.
In addition to the lower rates, the reforms also allow merchants to offer customer discounts for use of cash, checks and debit cards without penalty from the card networks. Importantly, restaurants are now able to choose from at least two independent payment networks, which injects much needed competition into the market.
Repealing debit swipe-fee reform would once again tilt the balance away from Main Street small businesses, their consumers and your constituents. Please oppose any attempt to repeal debit swipefee protections.
Alabama Restaurant & Hospitality Alliance
Alaska Cabaret Hotel Restaurant and Retailers Association
Arizona Restaurant Association
Arkansas Hospitality Association
California Restaurant Association
Colorado Restaurant Association
Connecticut Restaurant Association
Delaware Restaurant Association
Florida Restaurant & Lodging Association
Georgia Restaurant Association
Hawaii Restaurant Association
Idaho Lodging & Restaurant Association
Illinois Restaurant Association
Indiana Restaurant and Lodging Association
Iowa Restaurant Association
Kansas Restaurant & Hospitality Association
Kentucky Restaurant Association
Louisiana Restaurant Association
Maine Restaurant Association
Massachusetts Restaurant Association
Michigan Restaurant Association
Minnesota Restaurant Association
Mississippi Hospitality & Restaurant Association
Missouri Restaurant Association
Montana Equipment Dealers Association
Montana Restaurant Association
Montana Retail Association
Montana Tire Dealers Association
Nebraska Restaurant Association
Nevada Restaurant Association
New Hampshire Lodging & Restaurant Association
New Jersey Restaurant & Hospitality Association
New Mexico Restaurant Association
New York State Restaurant Association
North Carolina Restaurant & Lodging Association
North Dakota Hospitality Association
Ohio Restaurant Association
Oklahoma Restaurant Association
Oregon Restaurant & Lodging Association
Pennsylvania Restaurant & Lodging Association
Restaurant Association Metropolitan Washington
Restaurant Association of Maryland
Rhode Island Hospitality Association
South Carolina Restaurant & Lodging Association
South Dakota Retailers Association
Tennessee Hospitality & Tourism Association
Texas Restaurant Association
Utah Restaurant Association
Virginia Restaurant, Lodging & Travel Association
Washington Restaurant Association
West Virginia Hospitality and Travel Association
Wisconsin Restaurant Association
Wyoming Lodging & Restaurant Association
In other news, the NRA also sent a letter in support of the American Health Care Act to House Speaker Paul Ryan this week.
“Costly compliance issues, a shrinking risk pool, and higher healthcare costs have made the current structure of ACA untenable for restaurants … We support passage of the American Health Care Act as a way to move us forward in reforming the employer mandate and encourage Members of Congress to support this bill through Congress,” says Cicely Simpson, executive vice president of policy & government.
Below is the full letter:
March 20, 2017
The Honorable Paul Ryan
Speaker of the House of Representatives
H-232 U.S. Capitol Building
Washington, D.C. 20510
Dear Mr. Speaker:
On behalf of the members of the National Restaurant Association, we write to express our support for the American Health Care Act (AHCA). This legislation is an important first step towards reforming the employer mandate and lessening the burden that employers have faced in complying with the Affordable Care Act (ACA). Once this initial phase is complete, we look forward to working with you on additional fixes that are needed, including repealing the thirty-hour rule, streamlining the employer insurance reporting requirements, and repealing the seasonal worker definition.
Restaurants employ nearly ten percent of the nation’s workforce, or approximately 14.7 million Americans. With one million locations across the country, the $798.7 billion in sales from the restaurant industry makes up four percent of the US GDP. Restaurant jobs provide opportunities for promotion. Nine of ten salaried restaurant employees started in hourly positions. The typical hourly restaurant employee who starts out at an entry-level wage receives a pay raise after six months.
Restaurants are a training ground for the American workforce. One-in-three Americans got their first job in the restaurant industry and one-half of all Americans have worked in the restaurant industry at some point in their lives.
The National Restaurant Association is the leading voice for American restaurateurs on common sense reforms to the current health care law. Restaurant operators who can provide health insurance benefits to their employees often find these benefits to be critical tools in recruiting and retaining employees.
However, since the enactment of the ACA and the law’s employer mandate, restaurants have spent hundreds of additional administrative hours managing and delivering these benefits. The added time, money and resources have not improved the quality of health insurance restaurants offer their employees. Alarmingly, the ACA requirements have often discouraged restaurants from expanding and limited the degree to which they can hire additional employees.
Since the enactment of the ACA, employment-based health insurance is becoming a shrinking proportion of restaurant employee health insurance coverage. A record 76 percent of restaurant employees had health insurance coverage in 2015, according to data from the U.S. Census Bureau’s American Community Survey (ACS). These numbers are up from 59 percent of restaurant employees in 2010. However, this growth was driven primarily by sources other than employment-based plans, even though the ACA required more restaurant businesses to offer health insurance coverage. In fact, only 59 percent of restaurant employees with health insurance got their coverage through an employment-based plan in 2015—down sharply from 67 percent in 2010.
Additionally, health insurance costs rose much faster than restaurant sales in recent years. Between 2006 and 2016, the average annual employer contributions to health insurance premiums for family coverage jumped 51 percent, according to the Kaiser/HRET Survey of Employer-Sponsored Health Benefits. During the same ten-year period, average sales per restaurant rose just 33 percent. This indicates that health insurance costs are taking up a larger share of the restaurant dollar. Compliance issues, such as restructuring employee hours and the complicated employee reporting structures, increase the cost of employer-provided health insurance without adding value to the benefits or growing the business. Addressing these issues would help lower administrative costs and expand access so more employers could offer health insurance to employees.
Costly compliance issues, a shrinking risk pool, and higher healthcare costs have made the current structure of ACA untenable for restaurants. We need your help moving forward, so we can get to a place where we can address these critical issues facing all American employers including restaurants.
We support passage of the American Health Care Act to move us toward reforming the employer mandate and we encourage Members of Congress to support this bill.