Lawmakers’ efforts to pass a “stop-and-study” law that would delay the start of the Durbin amendment are gaining ground, a growing number of analysts say.
The likelihood for passage of bills introduced March 15 in the Senate and the House that would postpone proposed debit-interchange rules has risen to 40% to 45% from about a one in four chance last week, analysts at Keefe, Bruyette & Woods said in a report this week.
Sen. John Tester, D-Mont., introduced a bill that would delay the fees for up to two years while regulators study the cost; another bill Rep. Shelley Moore Capito, R-W.Va., introduced seeks a one-year delay.
The Federal Reserve Bank in December proposed rules capping debit interchange at 12 cents per transaction and giving merchants the right to choose a network.
The rules would go into effect in July, as mandated by the Durbin amendment to the Dodd-Frank Act. Final rules are expected from the Fed on April 21, but Fed Chairman Ben Bernanke said this week the Fed would need more time to review comments.
Tester’s bill still faces an uphill battle in gaining the 60 votes needed to pass in the Senate, but “we think (Tester) has more support than we originally estimated,” Keefe, Bruyette analysts wrote.
The bill would require a supermajority of 60 votes to head off a filibuster.
A few key compromises to Tester’s bill could help lawmakers win additional votes, the analysts suggest. One compromise could reduce the proposed delay to one year from two years; another could add “safeguards” to protect community banks from the new debit-interchange rates.
Whether a new bill will emerge as early as this week or after the final rules are released remains unclear. “It might be to Sen. Tester’s advantage to wait and seek a vote after the Fed’s final rule comes out next month (April),” the analysts wrote.
Michael Brauneis, director of regulatory risk in the Chicago office of Menlo Park, Calif.-based consulting firm Protiviti Inc., gives Tester’s bill “a decent chance” of passing this month.
“There is urgency to pass a ‘stop-and-study’ bill now, and the effort the banking industry is making to support it suggests they feel they have a pretty good shot at it,” Brauneis says. “Clearly the banking industry is not new to lobbying, and from their efforts on Capitol Hill right now we are getting the feeling they have reason to believe they will succeed.”
If a bill halting the rules fails to pass in the next few weeks, the Fed may issue final debit-interchange rules in April that will be “more favorable” than the proposed rules, which could quell further legislative efforts to delay the rules, Brauneis speculates.
“There is also a good chance that the final rules will allow card issuers to include certain additional costs for supporting debit, and that the interchange ceiling could be lifted to a higher level than 12 cents, or at least made more flexible,” Brauneis says. “That would be the silver medal for card issuers, and they would probably settle for that, while the gold medal would be getting a bill through in April that will delay the rules from taking effect.”
Brett Mansdorf, a principal with Dover, Fla.-based independent sales organization Majestic Bankcard LLC, told PaymentsSource last week he has been following the process closely, and he doubts any efforts to delay or substantially change the rules’ implementation will succeed.
