Sen. Richard Durbin said legislators may exempt prepaid cards that governments use to distribute benefits from the legislative efforts to overhaul interchange fees.

"It's a special-case situation," the Illinois Democrat said during a Washington hearing Wednesday addressing fees the federal government pays to accept debit and credit cards. "We are working on an amendment that will carve out these government types of cards."

Opponents of Durbin's proposal, including Visa Inc. and MasterCard Inc., say that reducing swipe or interchange fees would diminish or eliminate the incentive for banks to issue prepaid cards. Most state governments use those products to distribute benefits to senior citizens and needy families. Lawmakers are considering caps on the fees as part of the financial overhaul bill.

At least 10 state treasurers, including Shane Osborn of Nebraska and Nancy K. Kopp of Maryland, have said that Durbin's amendment threatens to undermine their prepaid card programs.

"These cards eliminate the need to print and mail checks to government assistance beneficiaries, saving our state — and taxpayers — millions of dollars each year," the treasurers wrote in a June 4 letter. "This is an especially important benefit for recipients who are 'unbanked,' sparing them from high check-cashing and money-order fees they are otherwise forced to pay in order to access funds and pay bills."

Rep. Debbie Wasserman Schultz, D-Fla., persuaded 131 House members to sign a letter urging the conferees to oppose Durbin's amendment, according to an e-mailed statement Wednesday from her office. Wasserman Schultz, a member of the House majority's leadership team, said consumers will face higher fees if Congress limits interchange fees.

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