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Senate balks at delaying swipe fee reforms

Good news for retailers seems too infrequent these days, so here’s some: Yesterday, the Senate torpedoed an attempt to delay the debit card swipe fee reforms (see Dealer Outlook, Jan. 20, 2011 and April 26, 2011) mandated by last year’s Dodd-Frank financial reform act. 

Senators Jon Tester, D-Mont., and Bob Corker, R-Tenn., attempted to delay for at least six months the Federal Reserve setting a cap on the monopoly-like swipe fees currently charged retailers. The Tester-Corker amendment, pushed by banking lobbyists, was attached to an Economic Development Reauthorization Bill. The vote was 54 to 45 to pass Tester-Corker, but it needed 60 votes for adoption. The failure to reach 60 is a victory for retailers.

According to Dodd-Frank, the Fed now faces a July 21, 2011 deadline for actual implementation of a cap. The Fed failed to meet a mandated April 21, 2011, deadline to issue new rules setting a cap on swipe fees to produce significant savings for retailers and consumers. Late last year, the Fed proposed flat swipe fees of 7 to 12 cents per transaction, a reduction of 70 percent or more than $1.2 billion a month currently charged retailers. As expected, the banks cried foul and turned to aggressive lobbying to kill it or, at least, get a long delay. Thus, the Tester-Corker amendment.

The provision in Dodd-Frank to set “reasonable” swipe fees came last year when retailers convinced lawmakers to give the Fed power to set such fees. Retailers cited excessive charges to them if a customer used a debit card versus no cost if the customer paid by check. They claimed the banks and companies that control the largest debit card networks, Visa and Mastercard, have consistently raised the fees even thought the market has grown rapidly and technology costs have plummeted.

Sen. Dick Durbin, D-Ill., was the lawmaker behind the proposal for swipe fee reform in Dodd-Frank. During debate on the Senate floor yesterday, Durbin defended the reform and argued that delaying it is akin to another bailout for big banks He specifically called out the three biggest banks that received TARP money and, he claimed, will benefit the most from the Tester-Corker amendment, namely Chase, Bank of America and Wells Fargo. Labeling the measure a “Baby TARP,” Durbin said “you can’t vote at 2 p.m. for the pending amendment and say you are a friend of small business.”

Where things go from here is not all together clear.  However, during the debate yesterday, Tester took the floor to push his amendment and stated the Federal Reserve has to follow the letter of the law and the intent of Congress. He said he hoped to avoid the current situation where there is slightly more than one month until the implementation date (he apparently forgot Dodd-Frank passed 11 months ago.)  Tester pointed that the Fed cannot ignore implementing regulations or arbitrarily delay implementation.

Reportedly, the Fed has now indicated it intends to meet the July deadline. Therefore, all retailers should be alert for more information very soon.


4 comments on “Senate balks at delaying swipe fee reforms

  1. Andrew Whittington

    Finally, some good news for the little guys and BIG guys as well.
    Now days it costs less to process plastic (debit card transactions) than paper (checks). The US is the only developed nation that has not adopted the principal of NO FEES for debit transactions. Why do you ask? Because BANKS and the credit card issues have a cash cow they don’t want to go to slaughter.

    It’s about time the banks got with the times.!

    Don’t feel sorry for the banks… Let’s remember, it was the greed of BIG Banks that pushed for less FED regulation, clouding the issues of true accounting principles that allowed the faulty loans, repackaging and eventual BAILOUT of their businesses by tax payers. They and WALL STREET are the ones to blame for causing the financial turmoil that destroyed so many peoples financial futures globally!

  2. Pedro

    I’m sorry, Norman, but this is yet another unnecessary and irresponsible regulation (buried in the horrible Dodd-Frank bill). If consumers and/or stores don’t want to use debit cards so be it. Please, please don’t call this a “victory for retailers”; other than a regulated monopoly the government (which supposedly is us) should not telling a business what it can charge. What do you say when we (the government) start telling the dealers ( us ) that we can only charge 10% gross margins?

  3. Bob

    Since when is it good news that banks can’t set the price for their services? What’s next, a limit on how much can be charged for a water ski?

  4. Rick

    I’m not one for Big Brother intervention but the rates these banks are charging is rape. All these banks stick together like the mob. Imagine what you’re gas & electric bill would be if not for regulation. Sometimes it’s necessary. I mean c’mon. I contact customer service at my merchant services and I’m put on hold for over a half hour. For the fees they charge us,there should be no wait at all. They should be able to hire plenty of customer reps to take our calls. If we decide to switch to another merchant,they hammer us a $295.00 “discontinuation” fee. I’m sorry,my heart doesn’t bleed for them one little bit……………….

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