Sunday, June 12, 2011

Fight on debit-card fees a test for Senate

WASHINGTON - In a heavily lobbied fight pitting financial institutions against merchants, supporters of the nation's banks pushed Tuesday toward a Senate vote aimed at blocking a government plan to cap the fees that stores must pay banks whenever a customer swipes a debit card.

Both sides claimed to represent consumer interests in the battle over the $16 billion yearly that the Federal Reserve says stores give banks in those fees. Merchants say the fees force them to charge higher prices and thwart their efforts to grow and add jobs.

Banks say the fees are too low because they don't consider all their costs in administering debit-card programs. They also say they'd have to raise other charges, such as for checking accounts, if the swipe fees are reduced.

A showdown vote was set for today. If successful, the provision would block a Fed proposal that would cap the so-called interchange fees at 12 cents per swipe. That's down from the current average of 44 cents, the result of fees that average 1 to 2 percent per transaction.

Last year's financial-overhaul legislation ordered the Fed to issue a proposal and for a final rule to take effect on July 21. The proposal debated by the Senate would delay the regulations for a year and order the Fed and three other federal agencies to study whether the proposal is fair and rewrite it if at least two agencies decide it is not.

With merchants and bankers important constituencies and contributors to both Democrats and Republicans, lawmakers' views on the effort cross party lines.

Sen. Jon Tester, D-Mont., a first-term lawmaker facing re-election in a GOP-leaning state next year, is a leader of the effort to block the cap on fees, while Sen. Richard Durbin of Illinois, the Senate's No. 2 Democratic leader, is its leading foe.

Durbin, author of the provision in last year's law that paved the way for the Fed's plan, said the fight offers senators a clear choice.

"They're either going to be on the side of the banks and credit-card companies, or be on the side of consumers and businesses across the America to give them a fighting chance," Durbin said.

Tester said he is not fighting for the nation's largest banks, saying, "They have plenty of sources of revenue."

Rather, he said, he is on the side of small financial institutions that dot his rural state, which he said would be in danger of disappearing if their revenues collapsed.

"Fewer banking options in rural America is a death knell for rural America," Tester said. "But that is where we are headed."

Using Senate procedures, Durbin was forcing Tester to win votes from 60 of the 100 senators to prevail.

Both sides conceded that Tester could be close to a victory, though it could be difficult for him to overcome the experienced and powerful Durbin in the behind-the-scenes struggle for the decisive votes.

Tester and Sen. Bob Corker, R-Tenn., another leader in the effort to block the Fed, said their proposal is a compromise.

Initially they sought a two-year delay, and their new plan has a shorter window. They conceded that debit-card fees will be regulated - it is just a matter of when and how.

Durbin said the effort is not a compromise because he and the merchants he is backing opposed it and had no input. Recalling the 2008 taxpayer bailout of faltering financial institutions, he said, "Are we going to be shaken down a second time? That's what this debate is all about."

The swipe-fee fight is an issue that many lawmakers would prefer to not have to vote on because it forces them to choose between two groups that few members of Congress are eager to provoke - especially with a third of the Senate and the entire House up for re-election next year.

Underscoring the unlikely coalitions the battle is spawning, Tester's proposal is backed by the conservative Americans for Tax Reform on the ground that the Fed plan would impose price controls.

Supporting Durbin is the Armed Forces Marketing Council, whose members operate exchanges on military bases and which argue that the fees hurt military families.

by Alan Fram Associated Press Jun. 8, 2011 12:00 AM

Fight on debit-card fees a test for Senate

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