A Senate bill to delay the implementation of the Durbin Amendment may be up for a vote as early as next Wednesday, reports the Credit Union Times. The legislation would delay the implementation of interchange fee regulation for 15 months, while federal regulators study the possible effects on credit unions and small community banks. Scheduled to be implemented in July, The Durbin Amendment to the Dodd-Frank financial reform bill would cap debit interchange fees at 12 cents a transaction. The original amendment exempts institutions with less than $10 billion in assets from the cap, but industry analysts, Federal Reserve Chairman Ben Bernanke and FDIC Chairwoman Sheila Bair have expressed doubts that such a carve-out would suffice.
Senator Jon Tester, Democrat of Montana and the bill’s sponsor, refused to confirm the timing of the vote or whether he believed he had the 60 votes necessary to pass the measure. If speculation is correct, Tester will introduce the amendment as a rider to a bill funding the Economic Development Administration.
Intense lobbying efforts by retailers and banks alike
Financial institutions, from the nationwide banks that hold a vast majority of the nation’s assets to the small lenders that far outnumber their larger counterparts, are thrilled that Tester’s bill will be considered. “We now have a Senate floor opportunity on a bill that is likely to reach the president’s desk,’’ said credit union lobbyist John McKechnie. “Now, we just have to win the damned vote.”
Both chambers of Congress and politicians on both sides of the aisle are backing Tester, including the third-ranking Democrat in the chamber and Durbin’s rival, Senator Chuck Schumer, credit union associations CUNA and NAFCU, and the Electronic Payments Coalition, which represents banks, credit unions and card networks. The financial industry gave substantial contributions to Tester’s 2012 reelection campaign after he put forth the delay.
Senator Dick Durbin, the second-ranking Democrat in the Senate and the namesake of the original bill, leads the effort to oppose Tester. He is joined by Majority Leader Harry Reid, retailers, some consumer groups, a substantial number of Democrats and a few Republicans unwilling to give Tester such a significant victory so close to Election Day. Although the Durbin Amendment passed with 63 votes, the Tester bill continues to gain momentum.
Retailers take their battle to the state legislatures
Political newspaper Roll Call reported that the National Retail Federation and lobbyists representing merchants are now pushing interchange reform at the state level. The legislatures of Maine, Minnesota, Rhode Island and Massachusetts are considering bills that would allow retailers to refuse to accept cards from specific banks. These bills would give merchants the option to deny debit cards from the small issuers exempt from the fee cap.
Lobbyists for Tester’s delay pounced on the bills. They say the exemption was key to the Durbin Amendment’s passage, and point to the proposed laws as proof that a two-tier pricing system cannot survive market forces.
“Durbin gets up and says, ‘We are trying to protect Main Street banks,’ but in the state legislatures, they are trying to do an end-run around the small bank protections,” a credit card lobbyist told Roll Call.
The bills, however, have stalled in the legislatures. Even Washington lobbyists for retailers are not enthusiastic. “It’s not exactly a great win for us if retailers can refuse a high-cost debit card,” said NRF lobbyist David French. “The retailer’s options are take a higher-cost credit card or a lost sale.”
Viable or not, the bills proved to be excellent fodder for the credit unions’ public relations push.