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The Illinois Democrat added an amendment to an appropriations bill that would require credit card payments accepted at government agencies to be given the lowest available market interchange rates, which typically can only be negotiated by large supermarket chains.
July 28 -
A Senate subcommittee Tuesday endorsed a bill that would cap interchange fees charged to federal government entities for taxes and other services at the lowest market rate, continuing efforts to lower interchange fees charged by banks and credit unions.
July 28
WASHINGTON — The Senate Appropriations Committee voted late Thursday to remove an interchange amendment authored by Sen. Dick Durbin.
Instead, the panel adopted by voice vote an amendment from Sen. Susan Collins, R-Maine, that would study whether to require credit card payments accepted at government agencies or corporations like Amtrak to be given the lowest market interchange fee rate available.
Durbin had unexpectedly added the requirement into a broader appropriations bill which the financial services subcommittee, which he chairs, approved on Tuesday.
Still, the Illinois Democrat vowed to keep fighting on the issue.
"You are not going to stop me here. Even with the study I'm not going to quit," Durbin said.
Banking lobbyists, however, were relieved and praised the outcome.
"We would like to thank Senator Collins for her leadership on this issue. Importantly, she and her colleagues recognized that taking away bank revenue, as the Durbin language would have done, only makes it harder for banks to make loans in their communities," said Ken Clayton, the head of the American Bankers Association card policy council. "Eliminating the Durbin language is a step in the right direction."
The fight over the interchange amendment came just one week after President Obama signed into law the regulatory reform bill, which included a Durbin provision that directs the Federal Reserve Board to ensure that debit interchange fees are "reasonable and proportional."
But Collins said the new provision was different, noting that it would set a specific rate rather than relying on regulators to handle the issue.
"The bill before us would actually set the price as opposed to leaving it to the regulators to determine," she said. "I believe that we don't know enough about the impact of this language on consumers, on small financial institutions and on federal agencies. I do understand Sen. Durbin's concern that federal agencies don't get full payment when a consumer uses a credit card but we don't know what federal agencies actually save by having the credit transaction rather than having checks or cash. We need to know more about that."
Durbin's new measure signaled that the Illinois Democrat is still intent on more regulation of interchange rates, including for credit cards.
"We didn't touch the credit card interchange fee" in the regulatory reform bill, Durbin said Thursday. "What this bill does is take the same determination and apply it to credit cards purchases for taxpayers across the country."
Durbin estimated the provision could save the government between $25 million to $30 million a year and said he expected resistance from banks.
"I understand. I'm going after their money," he said.
Ultimately, however, it became clear that many Democrats opposed Durbin's language, and Collins version, which would only study the issue, gained ground.
Even as the new threat emerged, bankers continued to try and convince lawmakers that they made a mistake to adopt the debit interchange provision in the regulatory reform bill.
In a hearing of the House Small Business Committee on Thursday, Robert Oeler, president and chief executive of the $5.7 billion-asset Dollar Bank in Pittsburgh, said the provision will "wreak havoc on our bank's ability to offer reasonably-priced products both to consumers and to small businesses in my community, as the costs of offering debit cards will not disappear."
He argued that the provision will drive up fees on checking accounts among other banking services.
Dollar Bank handles about 16 million debit transactions a year, with net interchange revenue amounting to less than 1% of sales, he said.
Oeler argued that interchange fees are necessary to help offset the cost of operating checking accounts. At Dollar Bank, he said the debit interchange revenue provides about $32.85 per card annually or about $3 per month but that the cost of maintaining a transaction account runs between $12 and $15 a month.
"Without this income, it becomes very different for many banks to continue to offer low- and no-cost checking for our customers," he said. "The loss of revenue will, for example, impact the ability of banks to provide basic banking accounts which will impact low-income people that utilize such accounts for access to the banking system."
