WASHINGTON–U.S. Sen. Dick Durbin is working behind the scenes on a new effort to ensure small banks are not being hurt by the cap on debit card interchange.
The Illinois Democrat was the driving force behind last year's legislative provision that required the Federal Reserve Board to cap the fees that banks charge retailers on debit-card transactions (
Although the bill contained an exception for banks with under $10 billion of assets, both industry officials and regulators have argued small banks will still be adversely affected. Under one oft-cited example, Visa Inc. and MasterCard Worldwide may be unwilling to operate a two-tiered system, one for large banks and one for small banks. Both have created such systems, however.
"There is good reason to be concerned about it," Fed Chairman Ben Bernanke said at a Senate hearing in May.
Durbin now has inserted language into a larger measure, which is expected to be adopted by the Senate by next week, that instructs the Federal Trade Commission to issue a report on how the small-bank exemption is working.
The report, which would be issued in late 2012, would explain whether the FTC has found evidence that payment card networks such as Visa and MasterCard have taken steps to make it more difficult for small banks to compete in the debit card market with large banks. The report also would explore whether the networks have coordinated or colluded with large banks to put small banks at a disadvantage.
Durbin's latest move may reflect a belief that the FTC is likely to be tougher on Visa, MasterCard and large banks than the Fed. Last year's Durbin amendment to the Dodd-Frank Act instructed the Fed to develop the cap on debit interchange, but the Illinois Democrat later got into a public dispute with Bernanke over the likely success of the small-bank exemption.
"I don't think he trusts the Fed, so he's going to the FTC," Richard Hunt, president of the Consumer Bankers Association, which opposes the cap on debit interchange fees, said in an interview.
Durbin's office did not respond immediately to a request for comment on Nov. 1.
Democrats on a Senate subcommittee that Durbin chairs wrote the little-noticed provision that calls for a report by the FTC. It is part of a spending package that would fund various financial regulators. That bill is expected to be merged with other spending measures and be approved by the Senate later this week or early next week.
Under Senate rules, the FTC provision cannot be amended or removed when the spending measure goes to the Senate floor, according to a source familiar with the matter.
Consequently, opponents to the provision, who include lobbyists for large banks, likely only have will one chance to remove it. That opportunity will occur later, when the House and Senate merge their respective bills to fund financial regulators.
What do you think about this? Send us your feedback.
