WASHINGTON — Though housing has dominated the Capitol Hill debate on financial services matters, lawmakers are looking to press ahead on legislation to restrict interchange fees after returning from recess next week.

House Judiciary Committee members are considering changes to the bill to garner more Republican support, and a vote could be held as early as July 9, according to multiple sources.

The legislation is designed to give merchants a leg up in their bargaining position to negotiate rates for processing credit and debit transactions on the card networks.

A fierce grassroots campaign by groups like the Merchants Payments Coalition is resonating with members of Congress in both parties, and the topic could pick up steam as lawmakers fret over higher prices for consumer items like gasoline, sources said.

Though such legislation is unlikely to be enacted this year, the topic has caught House Speaker Nancy Pelosi's attention.

"The speaker is concerned about high gas prices and market conditions, such as high credit card fees for retailers, that help keep prices high," Nadeam Elshami, a spokesman for the California Democrat, said last week. "The speaker will closely monitor the legislation."

Visa Inc. announced last week that it would reduce credit interchange for fuel transactions. A spokesman for MasterCard Inc. said it has already taken such action.

"The additional headlines of gas stations refusing credit cards for gasoline purchases has a different wrinkle to it," said Brian Gardner, an analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc. "That's definitely something new and could give a little extra momentum to the bill, but I don't think it's enough right now to push it over the goal line. It may be enough to get it through the House Judiciary Committee."

Committee action this summer does help set the stage for next year, he said. "I definitely think it's on the agenda for next year. It's something that we'll be revisiting and talking about for quite some time, and if Democrats add to their majorities, as I expect they will, it could make it easier to pass interchange legislation next year."

As currently drafted, the bill by House Judiciary Committee Chairman John Conyers, D-Mich., and its Senate companion by Majority Whip Richard Durbin, D-Ill., would create an antitrust exemption to let retailers bargain collectively with the card networks.

The bills also would set up a three-judge panel, appointed by the Justice Department and the Federal Trade Commission, that would be able to decide rate decisions if negotiations break down.

Legislators are making efforts to soldier forward, even though government agencies are openly doubting the merits of such measures. Letters surfaced last week from Justice and the FTC that cited several concerns with bill.

The letters were in response to queries about the bill from Rep. Lamar Smith of Texas, the House Judiciary Committee's lead Republican, who is weighing whether to support it.

Keith Nelson, the principal deputy assistant attorney general in the Justice Department's legislative affairs office, wrote in a June 23 letter that the bill was "essentially price control legislation" and would "actually harm consumers, not benefit them."

He cited a recent Government Accountability Office report that found interchange price controls in Australia reduced the number of card reward programs and other perks. The bill "would diminish, not enhance, competition between payment card networks," Mr. Nelson wrote.

FTC Chairman William Kovacic wrote that the commission's Antitrust Modernization Commission has said that "exemptions from the antitrust law should be disfavored and urged that Congress exercise caution."

The AMC has recommended that such exemptions "be granted, 'rarely' and only where proponents have made a clear case that exempting otherwise unlawful conduct is 'necessary to satisfy a specific societal goal that trumps the benefit of a free market to consumers and the U.S. economy in general,' " he wrote in his June 19 letter.

Despite the letters, Rep. Smith may still support the bill — something that would help give it momentum in the House. A spokeswoman for the Texas Republican said, "We haven't staked out a position" beyond Rep. Smith's comment at a May 15 hearing that his "primary concern is how it will affect the American consumer." During the hearing he questioned whether such legislation would lower prices for goods and services.

Sources said there is uncertainty about potential modifications to the bill, but some lobbyists said lawmakers are considering dropping the three-judge panel in lieu of less direct government intervention. "The bill is expected to change, but no decisions have been made," said a committee aide. "There are a few different options on the table."

Possible alternatives include explicitly allowing merchant groups to boycott the card networks, requiring Justice Department oversight, or mandating binding arbitration.

The banking industry, hoping to kill momentum on the bill, has latched on to the Justice Department and FTC letters to bolster their arguments.

"The problem with all this line of thinking is that it disrupts the competitive marketplace," said Scott Talbott, a lobbyist with the Financial Services Roundtable. "When two sides come to the negotiating table, they bring their relative strengths and weaknesses. By throwing in a three-judge panel or binding arbitration or the ability to boycott, you tip the scales, giving the merchants an unfair advantage or a government-enforced stick, which disrupts negotiations or makes them unbalanced."

The banking industry is gearing up for a fight. On June 19 the Roundtable brought together 20 card division chiefs and other executives from companies like Citigroup Inc., BB&T Corp., Bank of America Corp., JPMorgan Chase & Co., Regions Financial Corp., SunTrust Banks Inc., Wells Fargo & Co., Visa, MasterCard, and various credit unions to discuss the bill with 33 members of key congressional committees and leaders of both chambers. Two days earlier the group set up a briefing for roughly 50 congressional staff members. "We are trying to halt the bill from moving forward, so we would oppose a markup," Mr. Talbott said. "There's no bill we could really support here."

Mallory Duncan, the chairman of the Merchants Payments Coalition, said his group wants to ensure that the card networks and the banking companies are forced to negotiate rates with retailers and needs to keep the judge panel or some other enforcement mechanism in the bill to ensure any deal has teeth.

"The purpose for the panel is to have an inducement for both sides to come down and say, 'We've got to reach a deal,' and the nature of the panel is such that whomever comes closest to fair is the one who is going to win," Mr. Duncan said. "It's important. You have to have some inducement to negotiate. The credit card companies have refused to negotiate up to now."

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