Legislation | KRG Hospitality

September 19, 2022by David Klemt David Klemt No Comments

Swipe Fees Cost Over $77 Billion in 2021

Swipe Fees Cost Merchants Over $77 Billion in 2021

by David Klemt

A bill that intends to lower the credit card fees merchants pay by creating more competition within the industry is before Congress.

This bill, the Credit Card Competition Act of 2022, has bipartisan support. The two sponsors behind it are Sens. Richard Durbin (D-IL) and Richard Marshall (R-KS).

Of particular note, the bill seeks to amend the Electronic Fund Transfer Act. Specifically, the amendment targets the networks that merchants use to process electronic credit card transactions.

In short, banks that issue credit cards would have to merchants at least two processing networks. According to experts in this space, the bill prohibits banks from making those networks Visa and MasterCard.

Billions in Fees

So, why are Visa and MasterCard in the crosshairs of this bill?

According to the Merchants Payments Coalition (MPC), Visa and MasterCard control 87 percent of credit (and debit) card markets. Per the MPC, Visa and MasterCard account for about 576 million credit cards.

In the U.S. alone, transactions amounted to $3.49 trillion in 2021. Eye-wateringly, those transactions were accompanied by $77.48 billion in merchant fees for the two processing behemoths in the same year.

For additional context, Visa and MasterCard swipe fees totaled $61.6 billion in 2020. That represents an increase of 137 percent over the decade prior. Adding the merchant fees for all cards, the 2020 total was $110.3 billion, which is an increase of 70 percent from the previous ten years.

As veteran operators are well aware, swipe fees are among the highest costs for restaurants and bars.

Merchants Payments Coalition Sends Letter to Congress

Compellingly, the MPC is urging Congress to investigate the Visa-MasterCard duopoly. In their view, the two processors’ dominance is stifling competition; harming business owners and consumers; and contributing to inflation.

“The two giant card networks and their partner mega-banks routinely use their market power to stifle competition and charge merchants the highest swipe fees in the industrialized world,” reads the MPC’s letter to Congress.

Further, the letter states, “It is difficult to imagine any other market in the U.S. economy in which two entities set prices for thousands of businesses that should be competitors. That lack of competition or downward pricing pressure has resulted in out-of-control swipe fees and increases inflation throughout the economy.”

The MPC is urging Congress to act quickly and effectively: “It is crucial for Congress to act swiftly and implement real reforms to bring true competition, transparency and equity to the U.S. payments market.”

National Restaurant Association Supports the Bill

Interestingly, the National Restaurant Association says they’re working with the MPC.

The NRA is also working with other organizations to drum up support for the the Credit Card Competition Act of 2022.

You can read about their support for the bill on their website. Additionally, you can tell Congress to pass the bill here. As it stands currently, no action beyond the bill’s introduction to the Senate on July 28 has taken place.

Image: Pixabay

United States Capitol Building beneath cloudy skies

January 25, 2022by David Klemt David Klemt No Comments

NRA Sends Survey Results to Congress

NRA Sends Economic Survey Results to Congress

by David Klemt

On the heels of the IRC’s National Day of Action to Save Restaurants, the National Restaurant Association has sent a letter to Congress.

Sent by Sean Kennedy, executive vice president of the NRA, the letter urges Congress to finally replenish the RRF.

“After two years of closures, COVID-19 variants, worker shortages, and inflationary pressure,” reads the letter, in part, “a dangerous number of restaurants are at the end of the line.”

A Critical Moment

As I’ve written several times (exhaustively, some would say), the bill meant to replenish the Restaurant Revitalization Fund was first introduced in June 2021. We’re now a week away from February 2022.

In August of last year, a unanimous consent vote to provide $43 billion in emergency funding to the industry was shot down by Senator Rand Paul (R-KY). Build Back Better passed the House in November 2021. However, it didn’t include the Restaurant Revitalization Fund Replenishment Act.

As expressed by Sean Kennedy in an email sent yesterday, we’re at a critical juncture. Kennedy points to two dates when making his point: February 18 and March 1.

All government spending expires on the former date, and President Joe Biden delivers his State of the Union Address on the latter date. Kennedy suggests that the only large-scale spending bill of 2022 will be passed between those dates.

So, it’s probable that we have mere weeks to pressure Congress into replenishing the RRF.

The Numbers

Kennedy’s letter to Congress is addressed to Nancy Pelosi (D-CA), Chuck Schumer (D-NY), Kevin McCarthy (R-CA), and Mitch McConnell (R-KY).

Citing the results of the NRA’s largest-ever economic survey, Kennedy urges action on the RRF from Congress. The NRA’s executive vice president estimates that replenishing the RRF will save over 1.6 million restaurant jobs.

Below are the survey results included in Kennedy’s letter to Congress:

88 percent of restaurants saw decline in customer demand for indoor on-premises dining due to the omicron variant.
76 percent of operators report that business conditions are worse now than they were just three months prior.
74 percent of operators say their restaurant is less profitable now than it was prior to the pandemic.
Almost 50 percent of restaurant operators who didn’t receive RRF grants feel it’s unlikely that they’ll stay in business beyond the pandemic without a grant.
94 percent of restaurant operators who applied for an RRF grant but did not receive funding said a future grant would enable them to retain or hire back employees.
96 percent of recipients said the RRF grant made it more likely that they would be able to remain in business.
92 percent of recipients said the RRF grant they received helped them pay expenses or debt that had accumulated since the beginning of the pandemic.
The initial round of grants, per the NRA, likely saved more than 900,000 restaurant jobs.

Now is not the time to relent—we need to keep up the pressure. If Kennedy and the NRA are correct, we have only weeks to receive the help our industry needs and deserves.

Image: Harold Mendoza on Unsplash

Time has run out hourglass, black and white

October 15, 2021by David Klemt David Klemt No Comments

Months Pass, RRF Still not Replenished

Months Pass, RRF Replenishment Remains Uncertain

by David Klemt

If you’re wondering if the RRF Replenishment Act of 2021 or ENTREE Acts are making progress, you’re not alone.

Unfortunately, it appears far too many politicians on all sides are focusing on anything but our industry.

Indeed, it’s apparently more important that they score political “points” for sniping at each other on social media; engage in hyperbole and histrionics; and overall engage in brinksmanship instead of doing anything meaningful for their constituents.

Meanwhile, the industry has lost more than $300 billion in revenue over 19 months. Additionally, we’re short at least one million jobs.

So, it’s not hyperbolic to state this: It’s no longer time for Congress to act, time has very much run out.

It’s up for owners and operators, their teams, and their teams’ families.

Replenish RRF Act

As people familiar with the Restaurant Revitalization Fund will recall, the fund launched with $28.6 billion. Obviously, that was nowhere near enough funding to meet the demand for grants.

The National Restaurant Association estimates that 177,000 grant applicants are still waiting for assistance. Those applications total more than $43 billion.

Essentially, $60 billion would be printed to replenish the RRF. That’s according to the language in the RRF Replenishment Act bill.

In June, Sens. Kyrsten Sinema (D-AZ) and Roger Wicker (R-MS), and Reps. Earl Blumenauer (D-PA) and Brian Fitzpatrick (R-PA) introduced the bill.

It’s now the middle of October.

ENTREE Act

Toward the end of July, Rep. Blaine Luetkemeyer (R-MO) introduced an alternative bill.

A ranking member of the House Committee on Small Business, Rep. Luetkemeyer proposed the Entrepreneurs Need Timely Replenishment for Eating Establishments Act on July 20.

Again, that was in July and it’s now October 25.

Known as the ENTREE Act (acronyms are fun, eh?), this bill wouldn’t just create $60 billion out of thin air.

Instead, per the text of the bill, the ENTREE Act would use unspent funds from the American Rescue Plan and Economic Injury Disaster Loans.

Now What?

In early August, there was an attempt made to replenish the RRF with $48 billion of emergency funding.

Sen. Ben Cardin (D-MD), along with a bipartisan group of senators, sought unanimous consent to authorize the funds.

Unfortunately, Sen. Rand Paul (R-KY) objected to the unanimous consent motion. The measure was blocked due to Sen. Paul’s objection and the RRF didn’t receive any emergency funds.

So, now what? In August, political insiders expressed their opinion that the ENTREE Act wasn’t likely to be passed.

Meanwhile, the RRF Replenishment Act hasn’t made significant progress since it was first introduced in June.

Most recently, members of the Independent Restaurant Coalition held a press conference with Rep. Blumenauer and Rep. Dean Phillips (D-MN). During the press conference, it was pointed out that Congress was voting on infrastructure bills that didn’t contain the RRF Replenishment or ENTREE Acts.

The most that can be said currently about any “progress” is that House Speaker Nancy Pelosi has made a promise that relief for the industry is coming, somehow, during some unknown timeframe.

Great. In the meantime, you, your family members, your friends, and your guests can contact their reps to put more pressure on them to replenish the RRF. You can also click here for more ideas from the IRC on how to get the message across that our representatives need to act now.

Perhaps reminders that every House seat and 34 Senate seats are up for re-election next year will help spur some action.

Image: Eduin Escobar from Pixabay