CQ TODAY ONLINE NEWS
Updated June 7, 2011 – 1:50 p.m.
Senate Vote on Debit Card Fees Pits Banks Against Retailers
By Ben Weyl, CQ Staff
The banking industry and its Senate allies are making a last-minute push to delay new debit card rules, even as the retail industry lobbies furiously against the effort.
The fight could be decided Wednesday when the Senate votes on an amendment offered by Montana Democrat
The vote offers the banking industry a chance to undo a major victory for retailers included in last year’s financial regulatory overhaul (PL 111-203). Both sides have continued to wrangle over the matter since then, with the final outcome of Wednesday’s ballot still uncertain.
The new limits on fees are set to take effect next month.
“I just don’t think we’re going to know until the vote tally is actually announced,” said Brian Gardner, a senior vice president at Keefe, Bruyette & Woods.
The amendment was filed Tuesday to an economic development bill (
In an effort to appeal to undecided senators, Tester and Corker framed their legislation as a compromise; they previously had introduced legislation (
“This amendment is a compromise, and that’s how we do business in Montana. We find the common ground, and we work together to do what’s best,” Tester said.
“What we’ve tried to do is come up with a compromise that works for both sides,” added Corker on the Senate floor immediately after.
But Majority Whip
“Who did you compromise with? It wasn’t with the people who were affected by these debit card fees. No. They compromised among the banks,” he said. “The banks all sat down and said, ‘Let’s work this out among us because we’re talking about real money here.’ ”
The Brass Tacks
Currently, for each swipe of a debit card, banks charge retailers roughly 1 percent of the transaction. Banks say the money is used to provide basic banking services to consumers and fight fraud. Retailers, however, argue that banks have been taking an outsized cut of their sales. In 2009, the fees totaled more than $16 billion in the United States.
Senate Vote on Debit Card Fees Pits Banks Against Retailers
Language requiring new limits on debit card fees was added to last year’s financial regulatory overhaul as part of a Durbin amendment that was adopted 64-33.
In December, the Fed proposed capping the fees at 12 cents per swipe regardless of the size of the purchase, which sparked outrage from banks.
Durbin had vowed that any attempt to roll back the provision would require 60 votes, which means that some senators would have to switch the votes they cast when the matter first came up.
At least three Democrats who initially voted with Durbin have announced they would support legislation to delay the fees:
“The bottom line here is moderate, bipartisan compromise will move the ball forward,” Hagan said.
One Republican,
Still Undecided
Many lawmakers, however, have declined to say where they stand on the matter ahead of the vote.
Republicans
“I support the regulation of interchange fees. I believe that there’s not sufficient transparency in how they are set and applied and that they’ve cost merchants a great deal of money,” Collins said.
But, she added before Tester’s amendment was filed, “I’ll take a look at what Sens. Tester and Corker come up with . . . . Until I see what the specifics are, I can’t make a decision.”
New Hampshire Republican
Conservative Advocates Weigh In
Senate Vote on Debit Card Fees Pits Banks Against Retailers
On Tuesday, two influential conservative advocacy groups urged support for Tester’s amendment, which could bolster Republican support for the delay.
“The interchange fee regulations violate free-market principles and property rights, setting below-cost price controls and depriving card issuers of a return on capital invested,” said an Americans for Tax Reform statement announcing it would include the vote on its annual congressional scorecard.
Former House Majority Leader Dick Armey, R-Texas, who now chairs the tea party-related group FreedomWorks, sent an email to activists in support of Tester’s amendment.
“Government bureaucrats should never be in the business of trying to set prices,” Armey said. “The market should be allowed to operate free from government intervention in setting interchange fees.”
However, another conservative group, the Club for Growth, is trying to squelch the underlying bill, which would force Tester to find another vehicle for his legislation. Finding an appropriate vehicle to attach the amendment has been an ongoing problem for supporters, and other controversial amendments threaten to upend the economic development measure.
If the Senate adopts Tester’s amendment and passes the economic development bill, the House could be expected to look fondly on the debit card provision, if not necessarily the underlying bill.
But for now, the biggest challenge is the Senate’s 60-vote threshold.
First posted June 7, 2011 12:38 p.m.