House Panel Schedules Hearing on Swipe Fees
By J. Craig Shearman
Washington Retail Insight
January 27, 2011
The head of the House Financial Services Committee has scheduled a hearing next month on the Federal Reserve’s proposal to lower debit card swipe fees that cost merchants and their customers $20 billion a year. But he is downplaying the possibility that he might seek changes even though he has asked the Fed to delay implementation.
“I’m sure at some point there will be a hearing,” Chairman Spencer Bachus, R-Ala., told Bloomberg on Tuesday. “I think job creation and some other matters are going to go first.”
Later the same day, Bachus announced a series of hearings on a variety of issues, including one on swipe fees to be held February 17 by the Subcommittee on Financial Institutions.
Despite scheduling the hearing, Bachus said there is no consensus on how or if to change a provision in last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act that required the Federal Reserve to establish regulations that would result in “reasonable” debit card fees “proportional” to banks’ cost of processing debit transactions.
The Fed proposed in December that debit swipe fees, currently 1 to 2 percent of each transaction, be capped at a flat fee of no more than 12 cents per transaction. The agency, which says the move would save merchants and consumers 70 percent, is required to make the proposal final in April.
Bachus wrote to the Fed almost immediately after the proposed caps were unveiled in December, claiming Congress “devoted little if any time to considering the impact of these changes” before including swipe fee reform in last year’s legislation and asking that officials “proceed in a cautious and deliberate manner” before making regulations final.
Bachus claimed that cutting swipe fees “may end up creating an unlevel playing field in the industry that hurts small issuers like community banks and credit unions.” That is the same claim that the banking industry has been making despite the fact that the law specifically exempts financial institutions with less than $10 billion in assets, and allows smaller banks to continue charging current fees.
Senate Majority Leader Richard Durbin, D-Ill., who sponsored the amendment that inserted swipe fee language into the Dodd-Frank bill, has said he will fight any effort to repeal or delay the provision. Senate Minority Leader Mitch McConnell, R-Ky., said this week that he doesn’t believe the Obama Administration “is interested in revisiting the issue.”
In Tuesday night’s State of the Union address, President Obama cited swipe fee limits as an example of “commonsense safeguards to protect the American people.”
NRF last week issued an action alert asking retailers to contact members of Congress and urge them to oppose any efforts to roll back the Durbin Amendment or the Fed’s proposed changes.
NRF is asking the Fed to go even further than the 12-cent cap. NRF is arguing that debit cards are merely plastic checks, and that transactions should be honored at close to face value since paper checks drawn on the same bank accounts are cashed for their full amount.
© 2011 National Retail Federation
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