WASHINGTON -- U.S. House of Representatives and Senate Conference Committee negotiators on Friday reached an agreement to include interchange fee reform provisions in the final financial services reform bill that will now go to Congress for a final vote. The provisions, known as the Durbin Amendment after the author, Senator Richard Durbin (D-Ill.), will bring critical financial relief to retailers and consumers while promoting greater competition within the credit card industry, said NACS.
The bill also includes oil futures market reforms. House conferees approved the [image-nocss] measure 20 to 11, and Senate conferees voted 7 to 5 for approval, added PMAA.
A 43-member conference of House and Senate lawmakers finished the bill just after 5:30 a.m., after an all-night session, reported The Hill. The 2,000-page bill aims to prevent taxpayer-funded bailouts and revamp regulation of mortgages, credit cards, broad financial system risks and the $600 trillion derivatives market.
House and Senate Republicans on the committee unanimously opposed the conference report; Democrats all supported it, the newspaper said.
Treasury Secretary Timothy Geithner said the bill, "represents the most sweeping set of financial reforms since those that followed the Great Depression."
The underlying bill must now be approved by both the House and Senate before being presented to President Obama. In his weekly address on Saturday, the President urged Congress to send him the bill before the July 4 recess and that he would sign it. (Click here to view the address or to read the transcript.)
"This historic reform would not have been possible without the tremendous effort of our members who called on their senators and representatives and asked them to support this common-sense, consumer-friendly amendment," said NACS CEO and president Hank Armour. "These calls, along with the millions of consumer signatures convenience retailers collected and delivered to Congress urging credit and debit card fee reform, clearly shows that members of Congress are listening to their constituents."
Credit and debit card swipe feescalled "interchange fees" by the big banks that set these ratesare a percentage of each transaction that Visa and MasterCard and their member banks collect from retailers every time a credit or debit card is used.
The Durbin Amendment would direct the Federal Reserve to issue rules to ensure that debit card swipe fees are reasonable and proportional to the processing costs incurred. Visa and MasterCard currently charge debit swipe fees of around 1% to 2% of the transaction amountamong the highest rates in the industrialized world.
According to NACS, a number of independent research reports have confirmed what retailers have long argued: Swipe fees are considerably more than the actual cost of processing transactions and provide no commensurate benefits to retailers or consumers.
The Durbin Amendment also includes a provision directing the Federal Reserve to issue rules preventing card networks from requiring that their debit cards can only be used on one debit-card network, thereby ensuring that retailers will have the choice of at least two networks upon which to run debit transactions. In addition, the amendment would allow merchants to choose to decline credit cards for small dollar purchases because swipe fees often exceed profits on such sales. In addition, the amendment clarifies that retailers can offer discounts to consumers who choose to pay with cash, check or debit card.
The decision to advance swipe fee reform came despite intense lobbying pressure from the financial community, which sought to discredit the amendment by portraying it as damaging to small, community banks. The legislation, however, provides exemptions for small banks and credit unions. Banks with less than $10 billion in assets would not be affected by the legislation. Included in this exemption would be 99% of banks (all but 86), 99% of credit unions (all but three) and 97% of thrifts (all but 11).
The lobbying pressure brought on Congress by the banking industry in the past few weeks in an effort strip the Durbin Amendment from the bill likely will now switch to an effort to defeat the bill as a whole, NACS added. Already, the credit union industry is citing inclusion of the Durbin Amendment as rationale for its opposition.
Swipe fees have been the convenience and petroleum retailing industry's top "pain point" and second largest expense itembehind only labor costsfor a number of years, according to NACS. As a percentage of overall sales, card fees increased in 2009, from 1.35 to 1.45% of total industry sales dollars, factoring in all forms of payment, including cash and check. Total credit card fees ($7.4 billion) also surpassed overall convenience store industry pretax profits ($4.8 billion) for the fourth straight year in 2009.
Last month, NACS delivered to Congress two million consumer signatures that were collected at convenience stores across the country, making it one of the largest collections of consumer signatures ever for a public-policy issue. Combined with the 1.7 million signatures that 7-Eleven franchisees collected and delivered to Congress last September, and the 1.7 million signatures Speedway SuperAmerica delivered in June 2010, 5.4 million consumers have weighed in on this issue over the past year.
"This fight is not over," said Armour. "We support the negotiated package, and we must keep the pressure on to continue to fight for swipe fee reform and to get this legislation passed into law. NACS will continue to develop communications platforms that allow members to tell their elected leaders that we must eliminate the stranglehold that the big banks have on our businesses."
PMAA said oil futures market reforms include aggregate position limits on speculative oil traders, mandated clearing of over-the-counter (OTC) commodity derivatives, exemption of end-users like PMAA member companies from clearing and margin requirements if they are doing so for commercial purposes, and Commodity Futures Trading Commission (CFTC) authority to regulate swaps, OTC, energy-related and electronically-traded transactions by closing the so-called "Enron," "Swaps," and "London" or "Foreign Exchange" loopholes.
Financial institutions would have to separate their commodity derivatives trades into a separately capitalized entity walled off from federally insured deposits. This will essentially reduce the amount of leverage speculators take in trading West Texas Intermediate (WTI) crude oil, RBOB, and heating oil contracts, the association said.
"We have come a long, long way towards passing commodities futures market reform legislation. PMAA [has] led the effort to reform the futures market, and we worked closely with several hundred organizations to garner widespread lobbying support against the giant financial institutions that have spent hundreds of millions of dollars fighting this legislation," the group said in its most recent issue of PMAA Capitol Hill News.
"Petroleum marketers cannot afford to experience another dramatic and unjustified oil price runup like the one witnessed in 2008, which was largely a result of excessively leveraged speculators who controlled 80% of the futures market. The Wall Street reform legislation will give federal regulators the tools to improve transparency and give regulators the authority to impose aggregate position limits to minimize the number of highly leveraged speculators. The legislation will return these markets to which they were established for: bona fide commercial hedgers such as petroleum marketing, airline and agriculture companies" said PMAA.
The National Association of Convenience Stores is the international association for convenience and petroleum retailing representing more than 2,100 retail and 1,500 supplier member companies.
The Petroleum Marketers Association of America is a federation of 47 state and regional trade associations representing approximately 8,000 independent petroleum marketers nationwide.
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