WASHINGTON — The battle over interchange fees intensified Thursday as banks and retailers lobbied hard over an amendment that would reform how merchants pay for card processing.
It remained unclear by deadline when the Senate would vote on the measure, which would give the Federal Reserve Board authority to control the fee system for debit cards.
The amendment by Sen. Richard Durbin, D-Ill., has been steadily attracting support but was attacked this week by a range of groups, including community bankers and credit unions, who argued it threatens their ability to issue debit cards.
"It's a tough one politically for many people, but it's pretty clear to me," Durbin said at a press conference.
Durbin sought to calm fears about the measure's impact by adding language that would exempt all financial institutions with less than $10 billion of assets. Previously, it had exempted banks with less than $1 billion of assets.
"I can't tell you how many glowing speeches are given in Congress on behalf of small businesses," Durbin said Wednesday on the Senate floor. "We all know how much they mean to us, in our communities and in our overall economy. Well, here's our chance."
But his revisions did not appear to help, as both community bankers and credit unions said Thursday they would vigorously fight the amendment. They said retailers could discourage use of cards from smaller institutions — for example, by offering customer discounts — since they would not be subject to the fee restrictions.
"While we appreciate Sen. Durbin's efforts to exempt community banks from the harmful impact of his amendment, the fact is that the purported 'carve-out,' no matter how large, would simply not help consumers and their local community banks," Camden Fine, the president of the Independent Community Bankers of America, said in a press release Thursday.
At issue are the fees issuers charge merchants each time a customer swipes a credit or debit card when buying goods. Retailers have argued for years that the fee system — controlled by Visa, MasterCard and other networks — is anti-competitive and impedes their ability to profit from sales.
Durbin's amendment would focus on debit cards. It would require the Fed to establish regulations to ensure debit interchange fees are "reasonable and proportional" to the costs incurred by issuers to process a payment.
In addition, merchants could, without penalty, set minimum transaction levels for allowing electronic payments. Under current law, Visa and MasterCard can fine retailers if they impose such minimums.
The amendment would also let retailers give customers incentives to use one credit card network — which may charge a lower interchange fee — over another.
But a key complaint among banks and credit unions is that, though supporters of the legislation claim merchants could not discriminate against certain issuers, including small institutions not affected by the regulations, nothing in the amendment bars such discrimination.
"There's no language to" prevent discrimination. "There is nothing in there on that issue," Ken Clayton, the senior vice president of card policy at the American Bankers Association, said in an interview. "When you have the government set artificially low rates, any community bank trying to set a higher rate will be ignored by the retailer, which means customers will leave small banks in flocks to [go to] big banks."
Durbin rebutted that assertion, saying that merchants' programs "can't discriminate as to the issuer, … only as to the network, either Visa or MasterCard."
The intense rhetoric among bankers, retailers and lawmakers made it difficult to judge how much support the amendment has. Merchants' groups accused banks of spreading misinformation about the proposed reforms. A press release issued Thursday by the Merchants Payments Coalition was titled: "Opponents of Swipe Fee Reform Peddle Big Bank Bologna."
At the press conference, Durbin called out ICBA by name numerous times, accusing the trade group of opposing the amendment because it issues its own credit and debit cards. "ICBA is reportedly the 23rd-largest credit card issuer in this country, and the 20th-largest issuer of signature debit cards. They profit from the fees just like the big banks do," he said.
In response, Steve Verdier, ICBA's director of congressional relations, said its bank was not the issue.
"Certainly our banks are very interested in offering credit cards. Our bank," TCM Bank, "assists them in doing that," he said. "The interests of TCM Bank are identical to the interests of the community banks that it serves."
