WASHINGTON -- The Senate is poised to take sides in the high-stakes fight between retailers and bankers over new rules slashing debit-card fees, said The Wall Street Journal. Senators could vote as early as Wednesday on a proposal to delay the new rules lowering the interchange or "swipe" fees that banks charge retailers each time a consumer uses a debit card.
Senators Jon Tester (D-Mont.) and Bob Corker (R.-Tenn.) introduced the measure Tuesday as an amendment to another bill--the Economic Development Revitalization Act of 2011 (S. 782)--that the Senate is considering. [image-nocss] (Watch the video below or click here.)
The measure is weaker than financial firms had hoped, calling for a delay of six to 12 months instead of the two-year postponement Tester originally proposed.
The amendment represents the latest twist in the uphill effort to roll back a provision of the Dodd-Frank financial overhaul law and would prevent the financial industry from losing billions of dollars in interchange-fee revenue, said the report.
The changes have won Tester the support of at least three senators who voted for Sen. Dick Durbin's (D.-Ill) amendment to curb swipe fees last year: Sens. Kay Hagan (D.-N.C.), Mike Crapo (R.-Idaho) and Michael Bennet (D.-Colo.)
It remains unclear if the Tester amendment will surmount the 60-vote threshold it needs to avoid a Senate filibuster, the report said. Durbin's supporters said they have enough votes to kill the Tester measure; lobbyists for the financial industry say no one knows what the final vote count will be.
Under the Tester proposal, federal regulators would need to spend six months studying the effect of the swipe-fee limits on consumers and small banks and credit unions. If agencies find consumers or small banks and credit unions might be harmed, the rule would need to be rewritten.
An original version of the Tester and Corker's amendment called for a two-year delay, but was since rewritten to a six-month delay to win more votes in the Senate.
Although the Dodd-Frank law exempted small banks from the swipe-fee cap, the banks and some federal regulators have expressed concern the exemption will not work in practice, the Journal said.
Hagan told the newspaper that said she started working on compromise language with Tester and Corker after hearing such concerns. She said the Tester amendment would ensure "swipe-fee reform will take place" and would deflate efforts to repeal the entire swipe-fee provision from the law.
Durbin and the retailers who support swipe-fee limits oppose the new amendment. The Tester-Corker proposal is "a remarkable giveaway to big banks and credit-card companies at the expense of merchants and consumers," Retail Industry Leaders Association (RILA) president Sandy Kennedy said.
"The latest Tester-Corker swipe-fee language is no 'compromise' and was developed by big banks, for big banks without input from retailers or consumers who are counting the days until reforms take effect July 21," said Jennifer Hatcher, senior vice president, government relations at the Food Marketing Institute (FMI).
"Masked as a delay bill, the new legislation would effectively kill swipe-fee reforms. Any vote to delay the Federal Reserve's swipe fee rule is premature at this point, since no one has yet seen the Federal Reserve's final rule," said Hatcher. "The Federal Reserve is working on revision to a final rule that is expected to be published in the near future."
She added, "One thing all Senators have recognized from this debate is that the current system of unpredictable and excessive swipe fees is unfair and unsustainable for the U.S. economy, businesses of all sizes, and American consumers across the nation; however, the Tester-Corker language removes any guarantee that Main Street America will ever see relief from rising debit-card swipe fees, and we hope our U.S. Senators will recognize this when the Tester-Corker amendment vote is called. Since 2008, one million businesses have gone out of business, eliminating 3.6 million jobs. Swipe fees were a large contributor to those failures. And swipe-fee reforms can start to help turn this economy around."
Lyle Beckwith, senior vice president of government relations at the National Association of Convenience Stores (NACS), said, "This bill isn't about delaying the regulations and 'studying' the issue.' It's about derailing a bill that will save Main Street business owners and consumers billions of dollars--and instead putting that money in the pockets of the country's biggest banks. Senator Tester's amendment is a blank check to Visa, MasterCard and their big banks--and gives them permission to continue to charge merchants any amount they want for swipe fees. This is nothing more than a handout to the big banks and a slap in the face to consumers and retailers."
The National Retail Federation (NRF) today sent a letter (click here) to all members of the U.S. Senate asking them to vote against a so-called "compromise" amendment offered by Tester.
"This bill is no compromise," NRF senior vice president for government relations David French said. "It is a sham intended to kill swipe-fee reform even more quickly than his original bill and should be seen for what it is. Retailers and their customers could be forced to subsidize banks' costs of installing new ATM machines or building new branches. Even Wall Street bonuses and exotic junkets are likely to be considered costs under Senator Tester's new language. Rather than bringing fees down, this amendment will force swipe fees even higher."
A swipe fee reform provision included in last year's Wall Street law is scheduled to take effect July 21. The provision would reduce the fees by an estimated 70%, saving about $14 billion a year that retailers plan to pass along to their customers through discounts or other benefits, but the banking industry is spending millions of dollars to delay reform.
Regulations proposed by the Federal Reserve to implement the provision would lower debit-card swipe fees from their current level of 1% to 2% of each transaction to a flat fee of no more than 12 cents per transaction for large banks that adhere to fee schedules set by the card companies. Banks that set their own rates would be free to charge any fee they believe the market would bear provide that they do so independently. Financial institutions with less than $10 billion in assets are exempt.
A CSP Daily News Poll yesterday asked, "Do you think the delay will be approved?" Of the approximately 100 votes, about 65% said yes and about 35% said no.
(Click here for previous CSP Daily News coverage of the interchange fee-reform effort.)
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.