NGA Supports Federal Reserve Rule Protecting Debit Routing for Grocers

August 11, 2021

Washington, D.C. –  The National Grocers Association (NGA) filed comments in support of a proposed rule by the Federal Reserve Board of Governors to allow for grocers to choose how to route debit card transactions when customers purchase online.

The Federal Reserve announced in May that it would be clarifying its debit card rules to address card-not-present (CNP) enablement issues. NGA and other retail organizations have raised concerns with the Fed for years noting that merchants’ ability to route debit transactions when customers are not physically in store is being inhibited by the card issuers. As a result, grocers are forced to use costlier debit networks to process these transactions.  According to industry experts, the rule could impact the $2.8 billion in annual fees that grocers and other merchants are forced to pay when customers shop online with their debit card.

“Since the board promulgated its final rule in July 2011 implementing the prohibitions on network exclusivity and routing restrictions, barriers continue to inhibit merchants’ routing choice,” said Robert Yeakel, NGA director of government relations. “We ask that the board take swift action to finalize the proposed rule and uphold the entirety of Regulation II requirements for the benefit of U.S. consumers and merchants alike.”

Additionally, NGA called on the Federal Reserve to address the interchange fee rate that grocers pay when customers use a debit card issued by a regulated bank. This fee rate – roughly $0.22 to $0.24 per transaction – was implemented in 2011 and has not been changed in over a decade. Meanwhile, the costs that banks incur to process debit transactions have decreased significantly. The Fed’s own report, released in tandem with the announcement of their proposed rule, noted that the average cost to regulated issuers (banks with more than $10 billion in assets) to process debit transactions has declined by half from 2011, to $0.04.

“With merchants being charged roughly five times the average cost incurred by issuers per debit card transaction, NGA asks the board to move quickly to decrease the regulated rate as the current fee standard is neither reasonable nor proportional,” Yeakel added.

To view the comments submitted by NGA, please click here.