WASHINGTON -- As more than 100 small-business owners from across the country gather in Washington, D.C., today to urge Congress and the Federal Reserve to protect swipe-fee reform as passed by Congress last year, a bipartisan group of U.S. senators is drafting legislation to delay debit-card interchange fee rules that banks say would cost them billions of dollars, reported Bloomberg, citing two Senate aides with knowledge of the plan.
(Click here to see previous CSP Daily News coverage.)
The gathering near the Capitol is being led by Reform Swipe Fees NOW!, a project of the Retail Industry Leaders Association. The project unites U.S. business owners, small and large, in a campaign for fair debit- and credit-card swipe fees. Senator Dick Durbin (D-Ill.), Hank Armour, president and CEO of NACS, and Todd McCracken, president of the National Small Business Association, will also participate. (Click here to see previous coverage.)
But Senators Jon Tester (D-Mont.) and Tom Carper (D-Del.) are drafting legislation to delay debit-card interchange fee rules that banks say would cost them billions of dollars. They are working on the bill's language with Senator Bob Corker (R-Tenn.) according to the two aides who requested anonymity from the news agency because the talks are not public.
The Federal Reserve proposed capping debit-card interchange fees charged to merchants at 12 cents per transaction under a Dodd-Frank Act requirement to align them more closely with the processing costs. A bill to delay the measure, which may come this week, would be the first legislative attack on a rule that could cost lenders including Bank of America Corp. and JPMorgan Chase & Co. as much as $12 billion in annual revenue.
"There's no question legislation is being looked at," Corker told Bloomberg. "The question we're dealing with now is, what's the best way of approaching this issue?" The lawmakers discussed the shape of a bill on the Senate floor last night, Corker said.
Opponents of the rule have found supporters in Fed chairman Ben S. Bernanke and Federal Deposit Insurance Corp. chairman Sheila Bair, who questioned a provision exempting banks and credit unions with less than $10 billion in assets, saying it may have the unintended consequence of harming smaller lenders.
The comments by Bernanke and Bair, and acting comptroller of the currency John Walsh's March 4 letter to the Fed calling the proposal "unnecessarily narrow," bolster the case for a corrective bill, lawmakers said. At least seven senators who voted to include the swipe-fee provision in Dodd-Frank last year have filed comment letters raising concerns about the proposal.
If legislation is introduced, it would likely seek to change the timing of the rulemaking, which Dodd-Frank requires to be completed by April 21 and in effect by July 21. Bernanke said the Fed may miss the April 21 deadline.
The interchange-fee issue has cut across party lines, with Democrats squaring off with one another and Republicans in both chambers forced to pick between the largest retailers in their states or districts or the community banks and credit unions that have flooded Capitol Hill with calls and personal visits.
Representative Randy Neugebauer (R-Texas), who leads a Financial Services subcommittee, told Bloomberg that House lawmakers are crafting a bill that would require a two-year delay and an economic analysis by federal regulators of the rule's impact.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.) told credit union executives last week that they had been "sold a bill of goods, and that bill of goods was that interchange fees don't apply to you."
Still, Bachus said that the House leadership is waiting for the Democrat-controlled Senate to act before moving forward with their own legislation.
"Politically, this issue is really going to be a challenge," Bachus, an Alabama Republican, said.
The financial-services industry has combined its lobbying clout in the effort to beat back the rule, forming a coalition that includes banks, credit unions and card networks. The groups have taken the fight to congressional offices and airwaves across the country, with the Electronic Payments Coalition, a group representing payment networks and card issuers, funding a TV ad opposing the rule.
The Credit Union National Association and the Independent Community Bankers of America, Washington-based trade groups representing smaller lenders, have sent members to Capitol Hill to lobby for changes.
Retailers, including Target Corp., Wal-Mart Stores Inc. and Home Depot Inc. have fought back with lobbying and ads of their own in support of the Fed proposal. Retail industry groups have organized a fly-in of small-business owners this week to visit Capitol Hill to lobby against legislation.
"If debit cards go away, it's not going to help small businesses," Tester told the news agency.
Senator Richard Durbin, the Illinois Democrat who championed the swipe-fee provision, said retail-industry lobbying and his own outreach are starting to gain traction. Retailers "have spent the last seven to 10 days really getting mobilized," Durbin, the Senate's second-ranking Democrat, told Bloomberg.
There is still a long road ahead before any changes can be made, Brian Gardner, an analyst with Keefe, Bruyette & Woods, said tin a note to clients cited by the news agency. "Our view remains unchanged despite some of the recent political noise--we think it is unlikely that Congress will either delay the implementation of Durbin or change the substance," wrote Gardner, a former House Republican aide.
Still, the tactics being used by small banks and credit unions are having an impact, said Durbin, who cited regular calls he is receiving from colleagues registering concerns brought to them by local lenders.
The Fed has not publicly requested more time to craft the rules, even though Bernanke and Fed Governor Sarah Bloom Raskin told lawmakers last month that the central bank would have trouble meeting the Dodd-Frank deadline.
Getting a rule approved by April 21 "is a question at this point," Bernanke told lawmakers at a Senate hearing on March 2, Bloomberg reported.
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