Editor’s Note: Debit card interchange price controls are resulting in a transfer of wealth from consumers to retailers. Proposals to extend price controls to credit card interchange should be treated with great caution.
From: The Hill
Retailers won that battle when the Federal Reserve stepped in with new rules that limit the fees that banks can charge for debit card transactions.
Katherine Lugar, executive vice president of public affairs for the Retail Industry Leaders Association, said her trade group plans to be just as active lobbying against the credit card interchange fees, which retail lobbyists say generate about $30 billion per year for banks and card providers.
“We plan to do the same, if not more, to see that credit is reformed,” Lugar told The Hill. “Debit is step one. Credit is next. We are heading there very aggressively.”
But representatives of the financial services industry say the lobbying on credit card fees will fall on deaf ears. They contend that lawmakers are drained from the summer’s debate on debit fees and don’t want to be caught again between such big-box retailers as Target and Wal-Mart and banking giants such as Bank of America and JPMorgan Chase.
“There is total fatigue on this issue,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable. “They see both sides coming and they say, ‘Leave me alone. Get out of my office!’”
The debate over debit fees erupted again over the weekend, when Bank of America announced it would charge customers a $5 monthly fee for using their debit cards for purchases.
Retailers say they have always had credit card interchange fees in their sights.
Last month, the National Retail Federation announced a lobbying campaign, expected to cost at least $10 million, to help pass an ambitious legislative and regulatory agenda that includes reforming credit-card swipe fees.
Others are revving up for the debate.
“We have talked about credit and debit card fees for a long time,” said Doug Kantor, counsel to the Merchant Payments Coalition. “We’re now in a sense refocusing on credit card fees and reminding lawmakers of the bad behavior by the banks and the credit card companies.”
No legislation has been introduced this Congress yet to tamp down on credit card interchange fees. Furthermore, the partisan makeup of Capitol Hill has changed since Congress passed the Wall Street reform bill in 2010.
That bill included Sen. Dick Durbin’s (D-Ill.) amendment to tamp down on debit-card swipe fees. With the banks’ support, Sen. Jon Tester (D-Mont.) offered legislation to stall the debit card swipe fee regulations, but it died on the Senate floor this summer.
Lobbyists for retailers say they plan to educate lawmakers about the credit-card fees to help build a bipartisan consensus for action.
“Step one is to educate members on both sides of the aisle. Step two is to get strong bipartisan support,” Lugar said. “It will be more fierce. If you thought that was intense, Katie, bar the door!”
Financial services lobbyists believe they have a better argument this time. Credit card interchange fees pay for a service banks provide — essentially a loan to the retailer when a customer uses a credit card at their place of business.
“Credit interchange has been historically untouchable because the value proposition is more obvious. When a retailer accepts a credit card, the bank provides them the loan and forwards on the funds so the retailers benefit,” said Trish Wexler, a spokeswoman for the Electronic Payments Coalition. “People spend more on credit, so that’s good for the retailer.”
In 2008, Reps. John Conyers Jr. (D-Mich.) and Peter Welch (D-Vt.) both introduced separate legislation that included action against credit-card interchange fees. Welch’s bill went no further, while Conyers’s was passed out of the House Judiciary Committee but never received a floor vote.
Conyers and Welch both introduced their bills again in 2009, and hearings were held on them.
Durbin introduced legislation the last two Congresses to rein in both debit- and credit-card interchange fees. A spokesman for the Illinois senator said the lawmaker will take “a very close look” at reforming interchange fees again.
“Credit-card interchange fees remain as unregulated, anti-competitive and unfair to consumers today as they did in 2008 and 2009. As big banks try to drive customers from debit cards to credit cards, credit card swipe fee reform is something we’ll be taking a very close look at,” said Max Gleischman, Durbin’s communications director.
Wexler with the Electronic Payments Coalition says that with banks now charging their customers more fees to make up for lost revenue from lowered debit-card swipe fees, lawmakers will be too scared to tackle the issue.
“I think it would be politically untenable for a member of Congress to take on credit interchange because all of their constituents are already suffering as a result of the Durbin amendment,” Wexler said. “I can’t see anyone touching this with a 10-foot pole.”
Nevertheless, financial services companies will not back down if credit-card interchange fees are threatened.
“This is never going to die. It’s too important for the credit unions and the banks who rely on this revenue. And quite frankly, when two elephants fight, the grass underfoot gets crushed,” Wexler said.