WASHINGTON–In the wake of a new CFPB report that found Americans are paying tens of millions of dollars in fees to access their own money when getting “cash back” at large retail stores when making a purchase with a debit or prepaid card, a merchants group has responded by saying those fees are actually the “fault of banks setting high swipe fees charged to merchants and failing to provide services in small towns.”
In its report, the CFPB stated, “While this was often a convenient offering, getting cash at a store is sometimes the only option for people. Many retailers are filling a void in providing access to cash, as some communities lack access to a local bank. While some retailers have typically offered cash back for free, the CFPB’s recent market scan suggests that this is changing, particular at dollar store chains.”
‘Taking Losses’
But the Merchants Payments Coalition said the fault does not lie with the nation’s retailers.
“The CFPB’s report shows most merchants provide cash back to customers at no charge, and that means they are taking losses in order to provide this valuable service,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “Those who are charging a fee do so because they must pay exorbitant fees to credit card companies and banks. Most debit cards in small towns across America that have been abandoned by banks are not subject to federal regulations and charge merchants exorbitant swipe fees – much like credit cards that have no regulation at all. We should always be clear that the source of the problem with consumer fees on any card transaction is the banking and credit card industry.
“Swipe fees go up with every extra dollar in a transaction, so retailers have to pay higher fees if a customer wants cash back,” Kantor added.
Large & Small Differences
In its response to the CFPB report, the Merchants Payments Coalition noted that large banks with at least $10 billion in assets are limited by federal law to charging merchants 22 cents plus 0.05% of the total for a debit card transaction.
“But small local banks are exempt and can charge 2-3%, almost the same as the swipe fee for a credit card,” Kantor said in the statement. “That means a merchant can pay a fee as high as $3 for every $100 given as cash back.”
In its statement, the MPC further noted the CFPB said merchants typically charge between 50 cents and $1 for cash back, but that data from Bankrate show banks charge consumers record fees for getting their own money at ATMs – $4.77 on average for an out-of-network withdrawal.