Feds Open Comment Period On Cap On Debit Card Fees
The Federal Reserve has announced a proposal to lower the fees merchants pay to many financial institutions when consumers shop with debit cards. This major announcement was especially welcomed by the retail food industry. Currently, the fees which amounted to $16.6 billion in 2022, cannot surpass 21 cents plus 0.05 percent of a customer’s transaction amount. The proposed new fees would be reduced to 14.4 cents plus 0.04 percent of the transaction amount. The proposal would also establish a regular process for updating the maximum amount every other year going forward. The Federal Reserve has the authority to lower the cap if it determines that the costs for processing debit-card payments have declined. That is what the Fed has just now done. However, change will not occur overnight. The next step in the process is a 90-day public comment period that is sure to face extremely heavy lobbying from card issuers and merchants as well as input from Congress.
Merchants have been asking the Fed to lower debit interchange fees for years, with organizations like the Food Marketing Institute (FMI), the National Association of Convenience Stores (NACS), and the National Grocers Association (NGA) spearheading such efforts. The Supreme Court has also chimed in and has agreed to hear a case seeking to force the Fed to lower so-called swipe fees. Congress is also currently considering separate legislation that would rein in swipe fees.
Leslie Sarasin, FMI President and CEO, said recently, “We have long advocated for the Federal Reserve to reduce the regulated rate to reflect the significantly reduced cost of processing these transactions as was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.”
Doug Kantor, NACS general counsel, also chimed in and said, “The Fed tried to address high debit card fees over a decade ago but didn’t go far enough, and bank costs have continued to fall while fees have stayed the same. It is time for the Fed to update how much banks are allowed to charge and recognize that consumers, merchants, and the economy can’t afford overinflated fees.”
New FDA Deputy Commissioner Discusses Future Of Human Foods Program Under His New Leadership
In an October 19 invite-only media roundtable, James (Jim) Jones, the first deputy commissioner for human foods at the Food and Drug Administration (FDA), revealed his priorities for forging ahead with a new, unified Human Foods Program (HFP). You will recall in my prior commentaries that the FDA had been lambasted by Congress and numerous consumer watchdog organizations for not emphasizing food issues and policies within FDA and spending far too much time and effort on the drug side of the agency. The FDA’s answer to the problem was to create the first deputy commissioner for human foods position within the agency.
So, what was disclosed at the October 19 media event? Deputy Commissioner Jones stated that he was committed to upholding and executing the new, proposed framework for a unified Human Foods Program (HFP) and a new operations model for the FDA’s Office of Regulatory Affairs (ORA). “We will start driving towards this goal by focusing our efforts on three priority areas: preventing foodborne illness; decreasing diet-related chronic disease through improved nutrition; and safeguarding the food supply through the safe use of chemicals and dietary supplements.”
Helping people live healthier lives through the food they eat remains the cornerstone of FDA’s new HFP. Jones added, “I’m confident that with the help of the world-class experts in the FDA’s Center for Food Safety and Applied Nutrition, Office of Food Policy and Response, and ORA, we will bring the best we have to bear by creating a unified program that surpasses what each agency has been able to accomplish separately.”
We at Policy Solutions look forward to the development of new programs and policies to be rolled out in 2024 under the new and first office of the Deputy Commissioner for Human Foods. We believe this can only be a good thing for the food industry as well as for consumers.
Farm Bill Update
With all the turmoil last month that occurred in the House of Representatives, work on the 2023 Farm Bill was essentially stalled. Now that a new speaker has finally been elected, new priorities are being outlined and work will resume on passing appropriations bills and avoiding a potential government shutdown. And let us not forget there is the war and humanitarian crises in the Middle East that will further compound the status of not only the Farm Bill but many other initiatives before Congress. And at the beginning of the past month, a government shutdown was averted through November 17. So, we must see how all this plays out now till the end of the calendar year.
The bottom line at press time is that the 2023 Farm Bill is facing an added level of uncertainty. You may recall that I have mentioned previously that the 2018 Farm Bill package expired at the end of September and, without reauthorization or new legislation passed by the end of 2023, funding for agriculture and food programs could run dry. As for me, I am betting that the House passes a stopgap spending measure to give them more time to find solutions.
The dysfunctional House leadership did say recently that a late Farm Bill is nothing new because no Farm Bill this millennium has been approved on time. For federal food safety programs, the stakes are high because many food safety net programs, like SNAP and WIC, are part of the Farm Bill. Stay tuned.
Organic Standards Act Introduced
Ag Net Radio Network aired an interesting story recently that I picked up on. They reported that several industry groups have welcomed the introduction of the 2023 Continuous Improvement and Accountability in Organic Standards Act in Congress. The bipartisan legislation aims to enhance and update organic standards, ensuring they align with the evolving needs of the organic market. I do not need to remind you about the tremendous sales growth of organics in retail establishments thus we agree that this is an important bipartisan announcement.
The new bill, H.R. 5973, proposes amendments to the Organic Foods Production Act of 1990 by streamlining the process for reviewing and revising organic standards by USDA. The legislation also mandates USDA to review and revise national organic standards at least once every five years. The legislation is supported by a large coalition of organic organizations.
Food Recall Process To Be Updated
There is little doubt within the food industry that the current FDA process for communicating recalls is antiquated. When food products are recalled, it is critically important that retailers handle the recall process properly and efficiently. The negative press that can result from improperly handling a recall notice can be devastating. With press releases issued by industry as the primary communications method to inform consumers of a recalled product, FDA recently concluded that the time is now to modernize its proposed recall methods.
FDA held a public meeting on September 29 to discuss upgrades to the recall process and more than 60 speakers representing consumers, the food industry, the medical community and others presented their viewpoints on how FDA can modernize the recall process. The speaker’s statements focused on (1) rapidly identifying contaminated foods, (2) increasing the speed of recall notifications and (3) managing the efficiency of the FDA Recall Network. Expect to see new FDA updated policies announced in 2024.
California Becomes First State To Ban Harmful Chemicals
Here is an update on a story I first reported in my commentary three months ago. After considerable debate in the California general assembly, California Governor (and presidential hopeful) Gavin Newsom has signed the California Food Safety Act. The new California law is the very first such law in the U.S. to ban four harmful chemicals from candy, cereal, soda and other processed food produced and sold in the state. The new law ends the use of brominated vegetable oil, potassium bromates, propylparaben, and Red Dye No. 3 in processed foods. These chemicals are linked to human health issues, including hyperactivity, nervous system damage, and an increased cancer risk. As many as 12,000 products may be affected.
Our viewpoint of this new California law is that it creates a real problem for food manufacturers. How do they produce products for the entire country yet single out one state for “special manufacturing” requirements? Other states have already started to follow California’s lead including New York. FDA will most likely have to become involved to take steps to move this issue to the national stage, so we do not end up with a state-by-state approach to address these harmful chemical additives in foods processed in the U.S.
Barry Scher is associated with the public policy firm of Policy Solutions LLC and can be reached at [email protected].