WASHINGTON — Sen. Jon Tester, D-Mont., and a bipartisan group of senators Tuesday formally launched their legislative attack on the Federal Reserve's plan to regulate debit-card transaction fees, a move cheered by banks and credit unions but slammed by retailers.
The bill, dubbed the Debit Interchange Fee Study Act, comes amid mounting concerns over the Fed's proposed fee caps and calls for a two-year time out on the regulation.
The American Bankers Association, the Consumer Bankers Association and the National Association of Federal Credit Unions all applauded Tester's move.
The Fed's controversial plan, mandated by the Dodd-Frank financial-overhaul law Congress passed last summer, would cap what are known as interchange fees at 12 cents per debit-card transaction, a dramatic cut from the current average of 44 cents that has prompted consumer groups and banking regulators to voice concerns about the proposal's impact on small banks and low-income consumers.
Retailers have fought hard for limits on the interchange fees they pay to banks every time a consumer swipes a debit card at a cash register, and they won a key victory last summer when Assistant Senate Majority Leader Dick Durbin of Illinois included the interchange-regulation requirement in the Dodd-Frank bill. Durbin has since vowed to "strongly oppose" legislative efforts to delay the Fed rules.
"Every month we delay limiting the amount banks and credit-card companies charge merchants means another $1.3 billion bailout for Visa, MasterCard and their big bank allies," Durbin said in a statement Tuesday. "The $13 trillion banking industry doesn't need another handout — especially one paid for by small business and American consumers."
Still, much is at stake for the financial industry. The Fed's fee restrictions would weigh heavily on the profits of card-issuing banks, and many financial firms have argued that they would have to start raising fees and costs in order to recoup lost interchange revenue.
Although it would be hard for supporters of the Tester bill to get the 60 votes they will likely need to delay implementation of the Fed's interchange-fee law, bipartisan concerns over the Fed's proposal seem to be growing on Capitol Hill.
"The stakes are simply too high to move forward with this rule without a closer look at the impact on consumers, credit unions, community banks, and the small businesses and jobs they sustain," said Tester, a member of the Senate Banking Committee. "That is why we need to make sure we stop and study these proposed rules before implementing anything."
Sens. Bob Corker, R-Tenn., Jon Kyl, R-Ariz., Ben Nelso, D-Neb., Tom Carpe, D-Del., Pat Robert, R-Kan., Chris Coons, D-Del., Mike Lee, R-Utah, and Pat Toomey, R-Penn. are all co-sponsors of the legislation.
"The federal government shouldn't be telling private companies what they can charge for goods and services; that's price fixing, and that's exactly what the Durbin amendment does," said Corker, another member of the Senate Banking Committee.
Still, retailers are urging lawmakers to support the Fed's efforts to rein in the interchange fees and are criticizing the Tester bill.
"Despite the American people's repeated disapproval of bank bailouts, the Tester bill is just that, this time at the expense of retailers and their consumers," said Katherine Lugar, a spokeswoman for the Retail Industry Leaders Association. "The bipartisan swipe-fee reforms signed into law last year will bring fairness and competition to the broken debit market and will save consumers billions [of dollars] by ending decades of price-fixing by Visa and MasterCard."
