WASHINGTON -- On Tuesday, a group of nine senators led by Montana Democrat Jon Tester put their names behind legislation to delay the Federal Reserve's upcoming crackdown on the "swipe fees" that banks charge merchants for processing debit card transactions -- a huge moneymaker for the banking industry whose continuation is at the top of the industry's lobbying wishlist.
Retailers complain that the costs of high swipe fees, also known as "interchange" fees, hurt their business and are ultimately passed along to consumers in the form of higher prices. A provision in last year's financial-regulatory overhaul requires the Fed to limit such fees, and in December, the central bank proposed a rule that would cap the levies at 12 cents per transaction, a nearly 73 percent drop from the current average of 44 cents per transaction.
Merchants and financial reform advocates celebrated the move, but the banks are obviously loath to give up such a big piece of any revenue stream, let alone the swipe fees that industry analysts at The Nilson Report estimate yield $1.35 billion every month, or $16.2 billion per year. (Half of that total, according to Nilson, goes to just 10 banks.)
Tester's bill, the Debit Interchange Fee Study Act, would postpone the regulation for two years' worth of further evaluation -- and chances for the bank lobby to erase it entirely. Sen. Bob Corker (R-Tenn.), a GOP leader on financial issues, was Tester's principal partner in crafting the legislation. Other cosponsors include Senate Minority Whip Jon Kyl (R-Ariz.) and Sens. Tom Carper (D., Del.), Chris Coons (D-Del.), Mike Lee (R-Utah), Ben Nelson (D-Neb.), Pat Roberts (R-Kan.) and Pat Toomey (R-Pa.).
Across the Capitol, Rep. Shelley Moore Capito (R-W.Va.), the chair of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, is readying a companion bill with the backing of Rep. Debbie Wasserman Schultz (D-Fla.), a vice chair of the Democratic National Committee and a chief deputy whip of the House Democratic Caucus. The House bill, however, is expected to call for delay of only one year.
That bill may well pass the lower chamber, but Tester's legislation faces long odds in the Senate. As House Financial Services Chairman Spencer Bachus (R-Ala.) warned at a meeting of the Institute for International Bankers last week, any changes to the swipe fee regulation will have to get past the second-ranking Senate Democrat, Majority Whip Dick Durbin (Ill.), who first introduced the cap on swipe fees that ended up in last year's regulatory law.
"The $13 trillion banking industry doesn't need another handout -- especially one paid for by small business and American consumers," Durbin said in a statement Tuesday. "I will strongly oppose any attempts to line the pockets of the credit card giants and Wall Street banks by delaying this common sense, pro-consumer legislation."
But advocates of delay have been somewhat strengthened in recent weeks, as Fed Chairman Ben Bernanke and Federal Deposit Insurance Corporation Chair Sheila Bair both criticized the exemption for banks with less than $10 billion in assets -- one of the concerns Tester cited in a Tuesday statement upon his bill's introduction.
Republicans and bank lobbyists have taken a harder line, decrying the regulation as "price fixing." Corker used the phrase in his own Tuesday statement accompanying the Tester bill's introduction.
And while Tester and Corker were issuing their statements, the American Bankers Association was holding a meeting on lobbying at the D.C. Marriott Renaissance Hotel in Chinatown. At the meeting, which HuffPost attended, the banking group's COO, Michael Hunter, coached a packed ballroom of community bankers on ways to convince key lawmakers and staffers to support the bill. The Senate bill and its House companion, Hunter said, were the ABA's top legislative priorities for the coming year.
Hunter, who served as chief of staff for former Rep. J.C. Watts (R-Okla.) before joining ABA, advised the assembled bankers to work through and follow up directly with congressional staffers, rather than trying to press members of Congress who were unlikely to remember their names.
The Independent Community Bankers of America, the Consumer Bankers Association and the National Association of Federal Credit Unions all offered statements praising Tester's bill Tuesday, but of the various bank lobby groups, the ABA represents the broadest coalition. That hasn't been the case for all regulatory action, however. Community banks and some larger conventional lenders have declined to join the calls for limits on the reach of the nascent Consumer Financial Protection Bureau urged by large financial institutions and small payday lending firms, their direct competition and the principal targets of much of the new regulatory framework.
Small banks are mobilizing to fight the swipe fee crackdown, however, even though they are exempt from the new rules. To some extent, this is a reprise of last year's debate over the measure, when big banks convinced their smaller brethren that credit card networks like Visa and MasterCard would not be able to support charging different rates.
On the contrary, Visa announced in January that it would support such a two-tiered system, but community bankers remain concerned that retailers will have less incentive to accept their cards and higher, unregulated fees when the biggest names in banking are forced to offer much cheaper swipes.
Some opponents of the new rule are taking a more ideological opposing line. At the ABA meeting, House Majority Leader Eric Cantor (R-Va.) delivered a speech in which he castigated the swipe fee rule, becoming one of the many Republicans to refer to it as "price fixing."
"I am not for price fixing," Cantor declared. He went on to argue that the United States is currently "not overregulated," but rather, "super-overregulated."
For its part, the Merchant Payments Coalition, a lobby group representing both large and small retailers and which pushed hard in favor of the swipe fee crackdown, issued a statement dubbing the Tester bill a "bailout" for Wall Street and praising last year's bill as a move that would "limit the price fixing engaged in by the nation's largest banks."
The Consumer Federation of America, meanwhile, urged lawmakers to oppose the bill in a letter.
"CFA does not support delaying implementation of the law," the letter reads. "From a consumer point of view, the current interchange system is not defensible. Feeble competition ... has led to unjustifiably high debit interchange fees that the poorest Americans are required to subsidize."
A spokesman for the Federal Reserve declined to comment for this report.
How to vote
Vote-by-mail ballot request deadline: Varies by state
For the Nov 3 election: States are making it easier for citizens to vote absentee by mail this year due to the coronavirus. Each state has its own rules for mail-in absentee voting. Visit your state election office website to find out if you can vote by mail.Get more information
In-person early voting dates: Varies by state
Sometimes circumstances make it hard or impossible for you to vote on Election Day. But your state may let you vote during a designated early voting period. You don't need an excuse to vote early. Visit your state election office website to find out whether they offer early voting.My Election Office
General Election: Nov 3, 2020
Polling hours on Election Day: Varies by state/localityMy Polling Place