Foes of debit-card fee limits haven't given up the fight

By Dan Eggen
Washington Post Staff Writer
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.

Durbin said in a statement that the Visa fee announcement shows that smaller banks will not be hurt by the cap, which is aimed at helping general consumers save hundreds of dollars a year in hidden fees.

"As the Federal Reserve moves toward final implementation of this amendment, it's time to move past the misrepresentations and scare tactics and to recognize the strong pro-consumer and pro-competitive benefits of interchange reform," Durbin said.

ABA task force on lobbying

A bipartisan task force says Washington lobbyists should be subject to more reporting requirements and restrictions, including limits on raising money for lawmakers that they lobby.

The recommendations are part of a report issued this week by an American Bar Association task force that was formed after President Obama's push to restrict lobbyists' access to the federal government.

The task force, whose members range from veteran lobbyist Nicholas W. Allard of Patton Boggs to public-interest advocate Meredith McGehee of the Campaign Legal Center, proposes broader disclosure and registration requirements, which would include dropping the exemption for those who spend less than 20 percent of their time on lobbying.

Current laws "do not adequately require disclosure of lobbying activity," especially when they employ outside firms for some of the work, the report concludes.

The task force also calls for decoupling two of Washington's key activities - lobbying and fundraising - by barring lobbyists from making or soliciting contributions to lawmakers for two years after interacting with them.

The report says its proposals are intended to increase the transparency and ethical standards of the lobbying profession, which is "indispensable to the functioning of government."

"The proposals the Task Force offers are intended to restore the honor and enhance the efficacy of those in our profession who advocate for clients in the forum of public policy," wrote Charles Fried, a Harvard Law School professor who co-chaired the group.

Staff writer Ylan Q. Mui contributed to this report.

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