Senate Said to Be Nearing Bill to Delay ‘Swipe’ Fee Rules
Senator Jon Tester
Karen Bleier/AFP/Getty Images
Senator Jon Tester.
Senator Jon Tester. Photographer: Karen Bleier/AFP/Getty Images
March 8 (Bloomberg) -- Thomas Brown, chief executive officer of Second Curve Capital LLC and a Bloomberg Television contributing editor, talks about the outlook for Bank of America Corp. and Chief Executive Officer Brian Moynihan. Moynihan, hosting the lender’s first investor day since 2007, is seeking to assure investors the bank will return to profitability as the economy stabilizes and the company recovers from disputes with investors over soured mortgages. Brown speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
A bipartisan group of U.S. senators is drafting legislation to delay debit-card “swipe” fee rules that banks say would cost them billions of dollars, according to two Senate aides with knowledge of the plan.
Senators Jon Tester of Montana and Tom Carper of Delaware, both Democrats, are working on the bill’s language with Senator Bob Corker, a Tennessee Republican, according to the two aides who requested anonymity because the talks aren’t public.
The Federal Reserve proposed capping debit-card interchange fees charged to merchants at 12 cents per transaction under a Dodd-Frank Act requirement to align them more closely with the processing costs. A bill to delay the measure, which may come this week, would be the first legislative attack on a rule that could cost lenders including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) as much as $12 billion in annual revenue.
“There’s no question legislation is being looked at,” Corker said in an interview. “The question we’re dealing with now is, what’s the best way of approaching this issue?” The lawmakers discussed the shape of a bill on the Senate floor last night, Corker said.
Opponents of the rule have found supporters in Fed Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair, who questioned a provision exempting banks and credit unions with less than $10 billion in assets, saying it may have the unintended consequence of harming smaller lenders.
‘Unnecessarily Narrow’
The comments by Bernanke and Bair, and Acting Comptroller of the Currency John Walsh’s March 4 letter to the Fed calling the proposal “unnecessarily narrow,” bolster the case for a corrective bill, lawmakers said. At least seven senators who voted to include the swipe-fee provision in Dodd-Frank last year have filed comment letters raising concerns about the proposal.
If legislation is introduced, it would likely seek to change the timing of the rulemaking, which Dodd-Frank requires to be completed by April 21 and in effect by July 21. Bernanke said the Fed may miss the April 21 deadline.
Shares of San Francisco-based Visa Inc. (V) and MasterCard Inc. (MA), which set the fees and pass the money to card-issuing banks, fell more than 10 percent after the Fed’s plan was released Dec. 16 amid investor concern that the caps will damage their business model.
Visa advanced 2 cents to $74.17 at 4 p.m. in New York Stock Exchange composite trading, reversing an earlier loss after news of the Senate talks was reported. MasterCard, based Purchase, New York, climbed 0.7 percent to $249.
Party Lines
The interchange-fee issue has cut across party lines, with Democrats squaring off with one another and Republicans in both chambers forced to pick between the largest retailers in their states or districts or the community banks and credit unions that have flooded Capitol Hill with calls and personal visits.
In the House, where lawmakers didn’t get a chance to vote on a stand-alone measure during last year’s financial-regulation debate, Republicans have seized on the idea of government- mandated price caps and members from both parties have focused on the small-lender exemption.
Representative Randy Neugebauer, a Texas Republican who leads a Financial Services subcommittee, said in an interview that House lawmakers are crafting a bill that would require a two-year delay and an economic analysis by federal regulators of the rule’s impact.
‘Bill of Goods’
House Financial Services Committee Chairman Spencer Bachus told credit union executives last week that they had been “sold a bill of goods, and that bill of goods was that interchange fees don’t apply to you.”
Still, Bachus said yesterday that the House leadership is waiting for the Democrat-controlled Senate to act before moving forward with their own legislation.
“Politically, this issue is really going to be a challenge,” Bachus, an Alabama Republican, said.
The financial-services industry has combined its lobbying clout in the effort to beat back the rule, forming a coalition that includes banks, credit unions and card networks. The groups have taken the fight to congressional offices and airwaves across the country, with the Electronic Payments Coalition, a group representing payment networks and card issuers, funding a television advertisement opposing the rule.
The Credit Union National Association and the Independent Community Bankers of America, Washington-based trade groups representing smaller lenders, have sent members to Capitol Hill to lobby for changes.
Retailers
Retailers, including Target Corp. (TGT), Wal-Mart Stores Inc. (WMT) and Home Depot Inc. (HD) have fought back with lobbying and ads of their own in support of the Fed proposal. Retail industry groups have organized a fly-in of more than 70 small-business owners this week to visit Capitol Hill to lobby against legislation.
Tester, who is up for re-election next year, has faced negative advertisements in his home state by retailers.
The Montana Democrat said that while he understands the issue “has some controversy to it,” changes to the provision will end up aiding some of the small businesses that are lobbying against him.
“If debit cards go away, it’s not going to help small businesses,” Tester said today in an interview.
Senator Richard Durbin, the Illinois Democrat who championed the swipe-fee provision, said retail-industry lobbying and his own outreach are starting to gain traction.
‘Getting Mobilized’
Retailers “have spent the last seven to 10 days really getting mobilized,” Durbin, the Senate’s second-ranking Democrat, said in an interview.
There is still a long road ahead before any changes can be made, Brian Gardner, an analyst with Keefe, Bruyette & Woods, said today in a note to clients.
“Our view remains unchanged despite some of the recent political noise -- we think it is unlikely that Congress will either delay the implementation of Durbin or change the substance,” wrote Gardner, a former House Republican aide.
Still, the tactics being used by small banks and credit unions are having an impact, said Durbin, who cited regular calls he’s receiving from colleagues registering concerns brought to them by local lenders.
The Fed hasn’t publicly requested more time to craft the rules, even though Bernanke and Fed Governor Sarah Bloom Raskin told lawmakers last month that the central bank would have trouble meeting the Dodd-Frank deadline.
Getting a rule approved by April 21 “is a question at this point,” Bernanke told lawmakers at a Senate hearing on March 2.
To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
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