Durbin Vows to Win Debit-Fee Cap, Calls Objections `Manageable'
U.S. Senator Richard Durbin, the majority whip, said objections to his proposed cap on debit-card transaction fees are “manageable” and that the card industry fomented opposition by intimidating small banks.
“All of them are manageable,” the Illinois Democrat said today about concerns voiced by lawmakers as conferees work to merge House and Senate versions of the financial overhaul bill. “They’ll take some hard work to resolve, but we can do it,” he said in a telephone interview.
Durbin said he’s determined to push through his amendment and counteract the “unregulated power” wielded by Visa Inc. and MasterCard Inc., the world’s biggest payment networks. The measure would limit what merchants pay each time a customer uses a debit card. Durbin faces growing opposition in the House and from community banks and credit unions who say his plan will lead to higher fees for consumers.
Credit unions and community banks are lobbying against the proposal “out of fear” that San Francisco-based Visa and MasterCard, based in Purchase, New York, will punish them if they don’t, Durbin said. “Visa and MasterCard cannot show their faces in this debate” because card networks and banks are so unpopular on Capitol Hill, he said.
Instead, community banks and credit unions are being pushed into acting as “surrogates,” he said. “They’re afraid, and they’re expressing those fears to a lot of members of Congress who are sympathetic to the institutions,” Durbin said. “So, we’re doing our best to not only reinforce the bill’s provisions but to address these concerns that are raised.”
Opposition Group
Credit unions and community bankers “came to this judgment on their own,” said Shawn A. Miles, group head of global public policy at MasterCard. “They’re financially savvy, they understand the implications. We have not threatened them in any way, shape or form.”
Visa’s Will Valentine said the groups “reached their own conclusion” that the measure will harm consumers, raise costs and make it harder for smaller financial firms to compete. Jason Kratovil, a spokesman for the Independent Community Bankers of America, said the amendment will make it harder to provide “fee-free products and services that consumers have come to expect.”
Representative Debbie Wasserman Schultz, a member of the House majority’s leadership team, persuaded 130 colleagues to join her in signing a letter that urges the bipartisan conference committee to strip Durbin’s proposal from the bill. The Florida Democrat has said her opposition isn’t influenced by her husband, Steve Schultz, vice president of commercial lending at Community Bank of Broward in Florida.
Getting Heat
“Several members who’ve signed the letter have called me and said, ‘You know, we got a lot of heat from our local credit unions and we felt like we had to sign it in an election year,’” Durbin said.
Durbin wants to empower the Federal Reserve to set “swipe” fees, or interchange, that are “reasonable and proportional” to the cost of processing the transaction. The fees merchants paid to accept Visa and MasterCard debit cards last year totaled $19.7 billion and averaged 1.63 percent of each sale, according to the Nilson Report, an industry newsletter.
The measure also permits retailers to offer discounts based on the form of payment, or for a particular card brand, and set minimums and maximums for credit-card purchases.
To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net
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