As part of the Dodd-Frank financial reform law, the Federal Reserve has been directed to implement a cap on what are known as interchange fees — the fees that banks charge retailers to process debit card transactions. This cap was added to Dodd-Frank via an amendment proposed by Sen. Dick Durbin (D-IL) that passed by a 64-33 vote.
The Fed has proposed capping the fees at 12 cents, far below the current 44 cents per transaction that the banks charge. This has led the banks to launch an all-out lobbying campaign to delay (and ultimately repeal) the Durbin amendment. Yesterday, nine senators introduced legislation to delay the new rules for two years, presumably giving the banks ample time to cajole lawmakers into repealing the cap altogether:
Five of the nine senators who co-sponsored Tuesday’s legislation opposed the debit fee limits when Senator Richard J. Durbin of Illinois pushed the original legislation through the Senate last year…Only one co-sponsor voted in favor of the amendment, and the other three co-sponsors were not Senate members at the time.
That one co-sponsor who affirmatively voted for the Durbin amendment last year, but is now trying to delay its implementation, is Sen. Ben Nelson (D-NE). Sen. Jon Tester (D-MT), who is leading the charge to delay the Durbin amendment, said, “I think there is a little bit of buyers’ remorse as I talk to senators in the hallway.”
As the Roosevelt Institute’s Mike Konczal pointed out, “interchange rates in the United States are among the highest, if not the highest, in the developed world.” The fees have grown by more than 300 percent in the last decade. It’s worth noting that the American Banker’s Association applauded the effort to block the new regulation.
The cap would cost the nation’s biggest banks — and therefore save retailers, large and small — about $14 billion in fees per year. “The proposed regulations will benefit consumers by lowering the billions of dollars annually in non-negotiable swipe fees paid by merchants to large banks and the dominant credit card networks,” said Ed Mierzwinski of U.S. Public Interest Research Groups. Nelson last year agreed that this step to rein in the big banks needed to be taken. What changed between then and now?