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Wednesday, June 08, 2011

Banks Lose Debit Card Swipe Vote in Senate

The Senate defeated a measure that would have delayed implementation of a cut in the fees banks are allowed to charge retailers for each debit card transaction. Banks that issue debit cards stand to lose billions in fee revenue after the Federal Reserve issues its new rules on July 21 — rules that were mandated by last year’s Dodd-Frank financial reform bill.

The 54-45 vote on an amendment sponsored by Senator John Tester, D-Mont., and Sen. Bob Corker, R-Tenn., needed 60 votes to pass and came down to the wire, with proponents and opponents arguing on the floor right up until the vote was held.

The Tester-Corker amendment would have delayed the rules and mandated that the Fed spend six month studying how the swipe fee changes would affect consumers and financial institutions, among other issues. The Fed would then have six more months to rewrite the rules, potentially delaying implementation by a year. According to the National Retail Federation, which opposed the amendment, debit card fees total $20 billion a year.

Senate Majority Whip Dick Durbin, D-Ill., was the main opponent of the Tester-Corker amendment, and was the author of the measure that mandated the Fed ruling on swipe fees. In several floor speeches Wednesday he made impassioned pleas for a “no” vote on the measure.  Durbin argued that the largest banks in America – he named Wells Fargo, JP Morgan Chase and Bank of America – were fighting for the amendment’s passage because they stood to lose billions of dollars from swipe fees that hurt small businesses and consumers.

According to a proposed set of rules announced by the Federal Reserve in December 2010, a limit of seven to 12 cents per purchase would be part of the new rules, a more than 70 percent decrease from the 2009 average fee. Financial institutions with less than $10 billion in assets would be exempt from the new rules. (PBS News Hour, 6/8/2011)

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