House Democrats Ask Justice Department to Probe Debit Fees
Five House Democrats asked Attorney General Eric Holder to investigate whether U.S. banks and their trade groups colluded on decisions to impose new fees in response to caps on what they can charge for using debit cards.
“Statements made by individual banks and their trade associations raise questions about whether some price increases that have occurred this year have actually been coordinated,” Representative Peter Welch, a Vermont Democrat, wrote in a letter sent to Holder today. Representatives John Conyers of Michigan, Raul Grijalva of Arizona, Keith Ellison of Minnesota and Mike Honda of California also signed the letter.
The Federal Reserve imposed rules on Oct. 1 limiting fees card networks charge merchants to 21 cents per transaction, about half what retailers had been paying. In response, lenders including Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) have been rolling out new charges for debit customers to make up some of the $8 billion the largest banks may lose under the rules.
Bank executives and trade groups such as the American Bankers Association said during debate over the fee caps that lenders would need to raise other charges on debit-card users.
“The harm will fall largely on consumers; banks will be forced to lose money on debit interchange transactions and likely will compensate by increasing fees in some way for deposit customers,” JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon wrote in an April letter to shareholders.
Lawmakers and industry groups have fought over so-called swipe fees for more than a year after the rule was included in the Dodd-Frank Act. Retail and merchant groups lobbied to defend the reduction in the fees. A competing banking-industry campaign to delay the rules fell when the Senate rejected a proposed amendment in June.
Welch and his colleagues “continue to feign surprise and outrage at the consequences of an amendment that they themselves advocated at the behest of giant retail,” Trish Wexler, spokeswoman for the Electronic Payments Association, said today in a statement.
Bank of America’s decision to charge some debit-card holders a $5 monthly fee has drawn criticism from customers and policy makers, including President Barack Obama.
The lawmakers who sent the letter to Holder said they didn’t have evidence of wrongdoing and were leaving it to the Justice Department to determine whether banks engaged in illegal activity. The letter will be reviewed, Tracy Schmaler, a Justice Department spokeswoman, said in an e-mail.
‘Open and Honest’
“American consumers deserve honest and open competition in a market that is free of any hint of collusion,” Mallory Duncan, senior vice president and general counsel for the National Retail Federation, said in an e-mail. “We trust that the Justice Department will ensure that this is the case.”
The result may be that banks and their trade groups are aware that they are being watched, Ellison, a member of the House Financial Services Committee, said at a news conference in Washington.
“The mere fact of an investigation encourages law-abiding behavior,” Ellison said.
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