A week later, about 170 small-business owners--including several convenience-store owners and representatives of NACS--flew into town with the opposite message. The Fed plan is pro-consumer, they said, because it will help lower retail prices while preventing card issuers from profiting at their expense, money that goes to fatten bankers' bonuses, according to a Bloomberg [image-nocss] report.
Framing brawls about money as essentially consumer issues is a time-honored tactic in Washington. However, the debit-card fee issue is primarily a conflict between big business and big banks, Bloomberg Businessweek reported. Up for grabs is $16 billion in annual revenue. That's the amount merchants collect, based on an average of 44 cents per debit-card swipe, and turn over to banks. Retailers have been complaining for years about the hefty fees.
The fight is reaching a crescendo as an April deadline nears for the Fed to decide what is a "reasonable" fee, as required under last year's Dodd-Frank financial regulation law.
The central bank in December proposed capping the payment at 12 cents, causing banks to seek a legislative fix. Fed Chairman Ben Bernanke said at a February congressional hearing that "it's certainly possible" the Fed plan could result in higher bank fees for consumers. The Fed chief said his hands were tied unless the law is changed.
Retailers in early March released radio spots targeting one of the fee cap's most vocal opponents, Sen. Jon Tester, a Democrat from Montana, who is up for re-election next year.
"Millions of dollars leave Montana's main street to line the pockets of fat cats on Wall Street," said the ad, paid for by the Montana retail and convenience store associations.
The prospect of choosing sides has given pause to even the most seasoned lawmakers, given the political clout both banks and retailers wield back home. Six-term Sen. Carl Levin, a Democrat from Michigan, said he's reconsidering his vote for the fee cap, named for its author, Sen. Dick Durbin, a Democrat from Illinois.
"I voted for Durbin, but I promised some folks I'd review the matter and that's what I'm doing right now," Levin told Bloomberg.
A small group of senators from both parties is preparing a measure that would postpone the rule. House Republicans also are looking to delay the rule for two years while the government studies the potential economic effects.
Retailers such as Target Corp. (TGT), Wal-Mart Stores Inc. (WMT), and Best Buy Co. have the most to gain under the Fed proposal. Major banks such as Citigroup Inc., JPMorgan Chase & Co., and Bank of America are leading the opposition, said Durbin, while publicly keeping quiet.
"There's a lot of money on the table," Durbin said. "The big banks and big credit-card companies are keeping as low a profile as humanly possible," using the small lenders "as their beards."
The Fed rule could cause the banks to lose more than $12 billion in fee revenue. The card-issuer lobbying arm, the Electronic Payments Coalition, has pledged to spend $11 million to lobby Congress to change the plan. Even small banks, which Durbin's provision excluded, are upset. The exemption could hurt them if retailers hesitate to accept cards charging higher swipe fees.
In case they lose in Congress, JPMorgan, Bank of America, and other lenders already are moving to eliminate popular rewards programs and add new checking-account fees. During the rainy gathering outside of the Capitol yesterday morning, Rep. Peter Welch (D-Vt.) told the gathered retailers that the Durbin amendment was not a knock against the security that credit or debit cards offer consumers. "What this legislation is about is giving you a fair shot," Welch said, according to a report in The Hill.
Organizers--dubbed Reform Swipe Fees Now--had hoped that Durbin himself would be able to make an appearance yesterday, but a representative for the group said the senator was unable to because of a scheduling issue.
Supporters in attendance said the lower fees would be a boon to Main Street businesses.
"Year after year, I have seen these fees continue to rise and prevent guys like me from lowering prices, expanding business or strengthening a local economy," said Dennis Lane, who owns a 7-11 franchise in Quincy, Mass., and is a national spokesman for Reform Swipe Fees Now.
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