|Frank said that the new fees were too low and that it made sense to delay to find a system that was fair to all parties.|
Banks lose battle to delay cap on invisible fee
Retailers and consumers see victory
WASHINGTON — US banks lost a Washington battle yesterday to delay the advent of lower “swipe fees’’ that merchants pay when customers use debit cards to settle their bills, a move hailed as a victory by retailers and consumer groups.
The Senate refused to postpone next month’s rule reducing the invisible fees to 12 cents per transaction, bringing them down from as much as 44 cents. Banks expect to lose collectively up to $16 billion a year with the lower fees.
Banks suffered the defeat despite an unexpected, 11th-hour plug from Representative Barney Frank, who coauthored the massive Dodd-Frank financial overhaul bill that mandates the new fee caps starting next month. But even with Frank’s support for a postponement, a Senate amendment fell short of the 60 votes required for Senate approval; the vote was 54 to 45. Both senators from Massachusetts, John F. Kerry, a Democrat, and Scott Brown, a Republican, opposed the delay.
While the banking industry called it a “dark day,’’ predicting that banks would raise fees on account holders to make up for the lost revenue, consumer advocates were thrilled.
“It’s a victory for consumers,’’ said Bart Naylor, financial policy advocate for the consumer group Public Citizen.
“Senators have stood up to banks for something they want desperately — a revenue stream worth something like $16 billion a year. They don’t often stand up to . . . banks lobbying so intensively for an egg so golden as this.’’
The measure from Montana Democrat Jon Tester and Tennessee Republican Bob Corker would have delayed the fee decrease for a year, giving the Federal Reserve six months to study the issue and come up with a fair system of structuring the fees.
The cap on swipe fees was not a major part of last year’s Dodd-Frank law, which was primarily aimed at preventing another Wall Street meltdown like the one in 2008 that triggered the recession. It wasn’t in the House version that Frank authored; Richard J. Durbin, an Illinois Democrat, added it later in a compromise version. But the issue burst into the spotlight this week after months of intense lobbying and an ad war that has blanketed subways and billboards around Washington.
Major financial institutions, community credit unions, and small banks have been fighting for a delay to the implementation of the lower swipe fees to allow time for the study of a system that they believe would be more equitable.
Retail groups large and small fought back, calling the fees excessive and arbitrary and saying that consumers will benefit from the savings. According to a campaign finance watchdog group, the Center for Responsive Politics, the lobbying war has cost millions of dollars and has involved well over 100 lobbyists, highlighting the enormous stakes.
Brown, who had been lobbied by retailers who wanted the lower fees implemented on time, said the fees should be lower and the system of imposing them more transparent.
“I intend to follow the implementation closely to make sure that debit card consumers see the benefits, and that small banks and credit unions are not affected by this rule,’’ he said in an e-mailed statement.
Frank’s decision to support the measure caught some observers by surprise, given his earlier opposition to a two-year delay. Frank said that he believed that the new fees were too low and that it made sense to delay the reduction to find a system that was fair to all parties. He said the drop in fees would harm banks, including community banks and credit unions that are exempt from the fee decrease.
“I do think that what we did is damaging to some of the financial institutions in ways that aren’t to the consumer’s benefit,’’ he said.
While large banks also supported the delay, he said that he was seeking the delay on behalf of the community banks, which he maintained carry more clout on Capitol Hill.
“The lobbying strength in the financial area is not with the major institutions, it’s with the community banks and the credit unions,’’ he said.
Camden R. Fine, president of the Independent Community Bankers of America, said he was “extremely disappointed’’ with the legislation’s failure.
“What happened today was millions of consumers of very modest means who can barely access banking services were kicked in the teeth,’’ he said.
In contrast, groups representing retailers exulted over the defeat of the legislation. Among them was Dennis Lane, a Quincy 7-Eleven franchise owner and a national spokesman for a group called Reform Swipe Fees NOW! that supported the fee reduction.
“We bailed Wall Street and the banks out in 2009. I believe that Congress and the Senate have heard loud and clear that it was time to support the Main Street American retailer over Wall Street, and that’s what they did,’’ he said.
Kerry said in a statement that the heated debate obscured a widespread feeling in the Senate that it’s possible to have a fee structure that’s “fair for everyone and economically smart.’’