The Influence Industry
Foes of debit-card fee limits haven't given up the fight
Wednesday, January 12, 2011; 5:54 PM
Banks and credit-card lobbyists lost big last year when Congress approved new restrictions on billions of dollars in debit-card fees charged to retailers.
Now with more GOP allies in Congress, they hope to try again.
Under proposed rules issued by the Federal Reserve last month, the so-called interchange fee, or "swipe fee," on debit cards issued by major banks would be capped at 12 cents, which is about 70 percent lower than the average fee on such transactions last year. The Fed was required to address the issue as part of the Wall Street reform legislation passed by Congress.
The proposed cap has been hailed by consumer groups and major retailers as a necessary curb on the interchange fees, which are set by card processors such as Visa and MasterCard and paid to banks by retailers.
But the lower fees are strongly opposed by banks and credit-card firms, which argue that they will be forced to make up for the lost revenue by charging consumers in other ways. The American Bankers Association and other business groups are lobbying lawmakers and regulators to reconsider the policy.
"We oppose price fixing just in principle, and that's what this is," said ABA executive vice president Floyd Stoner. "Congress does address things and go back and look at things in a lot of arenas. We believe it can happen here."
But David French, who will take over in February as chief lobbyist for the National Retail Federation, said the policy should go forward. "We will fight to aggressively defend the law and resist the efforts of banks to roll it back," French said.
The GOP takeover of the House and expanded Republican numbers in the Senate could give the banking lobby another chance to rescind the swipe-fee cap, which is one of the regulations for major banks that was included in last year's Wall Street overhaul. Banks have begun adopting policies intended to recoup potential losses from the regulations, including a tiered customer system announced last week by Bank of America.
Interchange fees have long been opposed by consumer groups and large retailers such as Wal-Mart as excessive and unfairly controlled by a handful of companies that dominate the credit-card market. Banks received more than $16 billion in debit-card interchange fees last year, according to Fed estimates.
Under an amendment sponsored by Sen. Richard J. Durbin (D-Ill.) and adopted by Congress, the Fed is allowed to regulate and limit such fees for banks with assets worth more than $10 billion. The provision does not apply to interchange fees on credit cards or prepaid debit cards.
The first big sign of the provision's effect came last week, when Visa announced a two-tiered pricing plan for interchange fees that would limit payments to larger banks, in keeping with the new rules, while allowing higher fees for debit cards issued by credit unions and community banks.
The Independent Community Bankers of America, which represents small banks, said this week that it remains opposed to the proposed cap because it would "not prevent large retailers from steering customers to cheaper, rate-controlled cards issued by large banks." ICBA also issues its own debit card that would be subject to the cap.