As part of the Dodd-Frank financial reform law, a new provision was put into place allowing the Federal Reserve to cap the amount that banks can charge merchants for processing debit card transactions. The Fed has proposed capping the fees at 12 cents, far below the 44 cents per transaction that the banks currently charge. These fees account for about $16 billion annually for the banks.
The banks have launched an all-out lobbying campaign to delay (and ultimately repeal) this swipe-fee amendment, which was written by Sen. Dick Durbin (D-IL) and passed by a bipartisan 64-33 vote. The Electronic Payments Coalition, which is representing the banks in this debate, spent $2.5 million lobbying on this issue between January and April.
Today, the Senate will vote on a provision authored by Sen. Jon Tester (D-MT) that would delay the swipe fee cap for a year, giving the bank lobby another 12 months to convince Congress to kill it off entirely. And already, three senators who supported Durbin have flipped and will support Tester’s plan, delaying for a year a regulation that they already voted to approve:
The amendment represents the latest twist in the uphill effort to roll back a provision of the Dodd-Frank financial overhaul law and would prevent the financial industry from losing billions of dollars in swipe-fee revenue. The changes have won Mr. Tester the support of at least three senators who voted for Sen. Richard Durbin’s (D., Ill) amendment to curb swipe fees last year: Sens. Kay Hagan (D., N.C.) and Mike Crapo (R., Idaho) and Michael Bennet (D., Colo.)
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. “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.
Dodd-Frank is under assault in multiple ways, from House Republicans looking to gut the budgets of the financial regulatory agencies to the bank lobby pushing for delay after delay in bringing rules online. These three senators agreed last year that swipe fees needed to be reined in. So what changed?