WASHINGTON – The House Judiciary Committee, in the face of a withering lobby by banks and credit unions, barely endorsed a bill aimed at reining in interchange fees on credit and debit cards, effectively killing the bill for the year.
Because of the close vote in the committee, just 19-to-16, the bill is not expected to be brought to a vote by the full House, according to Brad Thaler, senior lobbyist for NAFCU. “It’s very doubtful they will move it to the floor, meaning it’s dead for the year.”
The close vote, said CUNA’s Chief Lobbyist John Magill, amounted to a victory, even though the committee passed the bill. “I don’t think there’s a real vision that this is going to move in the remaining days of Congress,” he told The Credit Union Journal last night.
The bill would have lifted antitrust restrictions and allowed merchants to band together to negotiate interchange fees directly with MasterCard and Visa, which currently set the rates. Critics say the rate-setting process should be opened up to allow for such bilateral negotiations.
The stakes are enormous, as American consumers paid an estimated $42 billion in interchange fees last year. More than $3 billion of which was shared with credit unions, making it an important profit center.
Yesterday’s drafting session for the bill was filled with confusion among both Republicans and Democrats, many of whom repeated the talking points put forward by the banks, credit unions and MasterCard, all of whom stand to lose lucrative interchange revenues if the bill were to pass.
Democratic Congresswoman Debbie Wasserman-Schultz of Florida, long an ally of CUNA, bucked the Democratic Chairman of the Committee and chief sponsor of the bill, Michigan’s John Conyers, by offering what several committee members referred to a poison pill amendment.
The amendment would have required that 100% of any savings accrued on interchange fees be earmarked for consumers, not merchants, who are leading the fight for lower interchange fees. Several members noted such a requirement would make the bill worthless for merchants to pursue lower fees. “You’ve eliminated the entire point of the bill,” said Democrat Jerry Nadler of New York.
“This is a poison pill,” said Republican Dan Lungren of California, referring to the Wasserman-Schultz bid.
Wasserman-Schultz then withdrew the proposal but suggested another amendment that would earmark interchange fee savings to pay for fraud losses on cards accrued by small banks and credit unions. That amendment also was withdrawn.
Both issues were part of talking points issued by the Electronic Payments Coalition, financed by MasterCard, Visa, banks and credit unions.
In fact, CUNA President Dan Mica sent a letter to all 40 members of the Judiciary Committee doubting whether a fee reduction – purportedly the aim of the bill – would be shared with consumers. “Any reduction in interchange is not passed through to the consumer. Only the merchants win,” Mica said in the letter.
In an extraordinary acknowledgment of the credit union and bank lobby, lawmakers offered an amendment to the bill that would exempt credit unions and small banks from the process.
“This is one of those few times when credit unions and banks worked hand in hand,” said Magill. “Somebody get a picture.”
Yesterday’s close vote, in which Democrats defected from their leadership, while some Republicans joined the Democratic supporters, makes it unlikely the Democratic leadership will bring the bill to the House floor, asserted Thaler.
A similar bill has been introduced in the Senate, but it also is not expected to be voted this year.
