In July 2010, retail groups praised Congress for passing and President Barack Obama for signing into law Dodd-Frank, which includes a provision to reform [image-nocss] credit-card and debit-card interchange fees. The bill includes an amendment sponsored by Senate Majority Whip Richard Durbin (D-Ill.) that would require the Federal Reserve Board to set regulations resulting in "reasonable and proportional" swipe fees for debit cards.
(Click here for previous CSP Daily News coverage of interchange fees.)
"We don't really know what the regulation is," said Representative Spencer Bachus, (R-Ala.), who took over the committee from Representative Barney Frank (D-Mass.) after Republicans gained control of the House in the November 2010 elections. Frank proposed the legislation in the House, while Senator Chris Dodd (D-Conn.) proposed it in the Senate.
"It's 2,400 pages," Bachus told the news outlet. "The regulators don't know what it is. They have to write the rules. It will be July before we know."
Republicans have sharply criticized Dodd-Frank, which was passed in response to the 2008 financial crisis, and have vowed to make major changes in the law or blunt its effects by cutting funding for regulatory agencies.
Baucus did not specify how he would attack the law, said the report, but two areas Bachus planned to address are debit cards, which he said will result in less capital and fewer loans, and derivatives, which he said will "cost us more than a trillion dollars in extra expenses."
"We'll go piece by piece, provision by provision," Baucus said.
Bair said that the financial world has "made peace" with what she called a "landmark" law. "It wasn't a perfect bill, but it's a good bill, and we're much better having it than not having it. We need to implement it and get on with it," she told CNBC.
Also, the Federal Reserve is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer's costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a standalone cap (initially set at 12 cents per transaction). Under both alternatives, circumvention or evasion of the interchange-fee limitations would be prohibited.
The Fed also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.
Click herefor the Fed's comment page on this issue.
(Click here for previous coverage.)
Meanwhile, as U.S. banks report their fourth-quarter earnings, many of the country's top banks are clearing large profit margins while threatening new fees, according to the Merchants Payments Coalition (MPC).
JP Morgan Chase & Co. saw fourth-quarter earnings jump 47% compared to the year earlier quarter, while Morgan-Stanley's fourth-quarter profit rose 88%. Despite American Express' corporate reorganization costs, earnings are still expected to increase 48% from last year's fourth-quarter, MPC said.
Despite these major profits, the big banks continue to cry foul over swipe-fee reforms that aim to fix the broken debit-card market as they threaten their customers with a new set of fees, the group said.
"Quarterly reports show that the banking giants are more concerned with big profits than they are with customer satisfaction," said Dennis Lane, who has owned and operated a 7-Eleven franchise in Quincy, Mass., for the past 36 years. "As a consumer and a small-business owner, it's quite the slap in the face to hear big bank executives griping about swipe-fee reform and threatening new customer fees while they continue to pad their own pockets."
The Merchants Payments Coalition is a group of convenience stores, retailers and small-business owners whose member associations collectively represent approximately 2.7 million stores with 50 million employees.
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