WASHINGTON -- Amid widespread outrage over new debit-card fees charged by Bank of America and other big banks, Chief Deputy Whip Peter Welch (D-Vt.) and House colleagues on Thursday called on Attorney General Eric Holder to investigate whether big banks are coordinating their fee strategies in violation of federal anti-trust laws.
Welch is the House leader on the issue of swipe fees and worked closely with Senator Dick Durbin (D-Ill.) to pass into law key debit-card swipe-fee reforms.
In a letter to Holder, Welch and his colleagues--representatives John Conyers (D-Mich.), Raul Grijalva (D-Ariz.), Keith Ellison (D-Minn.) and Mike Honda (D-Calif.)--highlighted public statements by banks and banking associations that point to possible efforts to coordinate fee increases.
"It appears that banks are seeking to justify fee increases after Congress and the Federal Reserve Board recently limited banks' ability to collude with networks to set debit interchange fees," Welch and his colleagues wrote. "Statements made by individual banks and their trade associations raise questions about whether some price increases that have occurred this year have actually been coordinated."
Click here to view the full text of the letter.
In one instance, said Welch, the Texas Bankers Association sent an email to members immediately following the failure in the U.S. Senate of a measure (the Tester-Corker Amendment) to delay debit-card swipe-fee reforms. The email read in part: "Now, the industry must regroup and each and every one of you must decide how you are going to pay for the use of debit cards. It may be through a monthly fee; it may be by using a 'prepaid' card as opposed to a debit card; it may be that there is a way to not offer retailers instant credit for the transactions, limiting the amounts that can be charged, etc."
It is entirely legal for banks to coordinate their lobbying and political activity, as they did to combat swipe-fee reform said a Huffington Post report. As part of that lobbying fight, banks regularly warned that if the fee they were allowed to charge merchants for accepting customers' debit cards was reduced, the banks would raise debit-card fees in other ways. That, too, is well within banks' lobbying rights. "But coordinating the fee hikes themselves could earn them a seat under a DOJ lamp," the report said.
Earlier this month, the American Bankers Association, acting on behalf of major banks, sent a letter to Congress explaining the reasoning for the fee hikes, underscoring the thin line between coordinating political activity and business practices.
Click here to view the full text of that letter.
Three of the nation's four largest banks--Bank of America, J.P. Morgan Chase and Wells Fargo--have recently announced that they are testing or will begin charging new debit-card fees.
"Actions taken by Bank of America earlier this week highlight our concern and demonstrate that immediate scrutiny of additional anticompetitive pricing practices by banks is in order," Welch and his colleagues wrote. "We are concerned that [Bank of America's] announcement may be a reaction to, and participation in, price signaling or collusion that has occurred among and between banks and bank associations."
In support of Welch's request to the Justice Department, National Retail Federation (NRF) senior vice president and general counsel Mallory Duncan said in a statement: "Legal experts testifying before Congress and litigation currently pending in federal court have argued that banks have violated federal antitrust laws by collectively setting credit and debit card swipe fees. Now we have members of Congress asking the same question about new fees some banks are dreaming up. American consumers deserve honest and open competition in a market that is free of any hint of collusion. We trust that the Justice Department will ensure that this is the case."
And Rachel Wolf, a spokesperson for the Merchant's Payments Coalition (MPC), said, "We have long been concerned about price setting in the payments industry. Anticompetitive activity is the opposite of a free market. It hurts genuine competitors and consumers. ... We urge the Department of Justice to investigate and, if warranted, send a clear message that banks can't coordinate fee increases with their competitors."
Click here to view previous CSP Daily News coverage of interchange-fee reform.
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