WASHINGTON — Although the House Financial Services Committee finally held its first discussion Thursday on whether to restrict bank interchange fees, the hearing served chiefly to dispel the idea that the panel was eager to legislate on the issue.
Chairman Barney Frank says the issue deserved a spotlight, but declined to say he intends to pursue legislation soon.
"The interchange bill is a new one for us … . This is the beginning of a serious look at this issue," the Massachusetts Democrat said at the outset of the hearing, which also focused on a bill by Frank and Rep. Carolyn Maloney, D-N.Y., to speed enactment of recent credit card reform.
Frank did not stay at the hearing for long and he told reporters when he left that he could bring the card enactment date bill for a vote as soon as next week. But on interchange fees, he said he had no plans beyond the hearing.
"The credit card bill we could vote on next week. The interchange bill is less clear because there is much more consensus as I said on the credit card bill," he said. "The interchange bill — that's really still an open question."
When asked if he felt interchange fees were more of an issue for merchants or consumers he said: "That's the question that will be addressed."
"The merchants say it adds to their costs … . I hope the banks aren't going to say that's a cost on the merchants and not on the consumer because they say if there is a cost that is imposed upon them, it will be passed along. In this economy, in a free market economy, costs imposed on the seller of the goods are passed along to some extent. Exactly to what extent is one of the things we're going to be talking about."
Frank also said support for interchange fee legislation in the Senate has been stronger than in the House. When Congress passed credit card legislation earlier this year he said that the House was the reason why interchange fees were not addressed.
"On the interchange bill I will tell you this: it is a very high priority to Sen. [Richard] Durbin," Frank said. "The Senate was prepared to put a version of the interchange bill into the credit card bill. We weren't ready to deal with it yet … . I think if we would have been at a point to accept it, I think it probably would have been in the credit card bill. The support has been more strong in the Senate thanks to Sen. Durbin."
Still, even holding a Financial Services Committee hearing on a bill by Reps. Peter Welch, D-Vt., and Bill Shuster, R-Pa., that would regulate interchange fees is a major step forward. The issue has been debated in the judiciary and commerce committees in recent years but not in financial services.
"He's giving us a hearing. Obviously we are taking this seriously. This is a growing problem. It's a big expense that is getting bigger for these merchants. Chairman Frank holding this hearing for us is a very good sign because he's got a very busy schedule," Welch said in a brief interview.
Several committee Democrats showed an interest in the issue even though many said they were far from decided on how to address it.
After a panel of industry, retailer and consumer witnesses testified, Rep. Luis Gutierrez, D-Ill., the panel's financial institutions subcommittee chairman, said he was most persuaded by the testimony of Kathy Miller, a small-business owner in Elmore, Vt., who said that interchange fees spread her margins so thin, she worries she'll have to close shop.
"Some days I feel like I should just turn in my keys — but too many people count on us," she said. "We are just trying to keep our doors open."
Gutierrez told Miller that the committee would try to help.
"Of everyone that's testified, I want to figure out how to help Mrs. Miller from Vermont and her store and her family business," he said.
In a brief interview during a break in the hearing, Gutierrez said that he is not sure how to proceed but the priority should be to help small businesses.
"I think we should look at small businesses like Mrs. Miller's and see the detrimental effect that this is having on their businesses," he said. "What we should be most concerned with here isn't the big retail chains, isn't the credit card companies but small businesses such as hers."
The hearing comes as merchants have stepped up efforts to draw attention to interchange fees. Last week, 7-Eleven Inc. delivered millions of signatures from a petition asking Congress to address the issue.
Rep. Maxine Waters, D-Calif., said she is frustrated with the big banks and wants to work with the bill's sponsors on some tweaks to the legislation.
"Many of us are just at this time very unhappy with the bigger banks in this country," she said. "We have bailed them out and they are hurting individual consumers and I'm particularly concerned about these … interchange fees."
Waters, who also serves on the Judiciary Committee, which passed an interchange fee-regulation bill in the last Congress, said she would work with the bill's sponsors to address some of the industry's concerns, but added that the "problems and abuses" must stop. She cited some of the network rules, such as one that requires merchants to honor all cards on a particular network like Visa or MasterCard, as unfair.
"There has to be some changes in the way that these fees operate now," Waters said.
"I'm going to work with the authors of this legislation to see if we can address some of your concerns as we make the changes, but these fees just cannot stay the same."