WASHINGTON — Congress may end up revisiting a long-fought battle over debit interchange fees after Rep. Randy Neugebauer, R-Texas, introduced legislation Tuesday that would eliminate current caps that were part of a contentious addition to the Dodd-Frank Act.
The Durbin amendment required the Federal Reserve Board to cap debit swipe fees for financial institutions with more than $10 billion of assets. The measure was billed as a potential savings for consumers, but opponents of the provision argue that the savings were never passed on to consumers.
"What the Durbin Amendment did do was artificially shift over $30 billion in revenue from one industry to another," Neugebauer said in a statement. "This legislation will restore competition in the marketplace, remove arbitrary government price caps, and ensure consumers have affordable access to basic banking services."
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Rep. Randy Neugebauer introduced a bill Thursday that is designed to reverse some of the negative effects of legislation enacted last year that cut the dividend the Fed pays larger banks. His bill would allow banks to redeploy capital held at the Fed.
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House Financial Services Committee Chairman Jeb Hensarling R-Texas, is set Tuesday to unveil an ambitious plan to revamp the Dodd-Frank Act and replace it with a capital-based alternative during a speech in New York.
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Sen. Dick Durbin, D-Ill., wrote to Visa on Tuesday to denounce an alleged new fee assessed by the company on credit and debit card issuers that see their business shift to a competing card network.
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Repealing the Durbin amendment would be a tough challenge for banks as the debate pits two influential lobbying groups — retailers and financial services companies — against each other.
Still, the financial services industry welcomed the measure.
"We commend Chairman Neugebauer for advancing repeal efforts and look forward to this legislation swiftly moving through the House and Senate," said Richard Hunt, president of the Consumer Bankers Association.
A joint letter by the CBA, the American Bankers Association, the Credit Union National Association, the Financial Services Roundtable, the Independent Community Bankers of America and the National Association of Federal Credit Unions also endorsed the plan.
"The Durbin Amendment intended to exclude small issuers from interchange fee ceiling restrictions, but the law offers no such exemption from the costly and burdensome network routing and exclusivity provisions a process that involves substantial and recurring administrative costs on top of an already challenging cost environment," the letter said. "The bottom line is this amendment introduced price fixing to a formerly functional and competitive marketplace and failed to keep the dubious promises made to sell it ultimately hurting customers."
The financial trade groups are also encouraged that Neugeabauer's bill to repeal the amendment is included as part of House Financial Services Committee Jeb Hensarling's Financial CHOICE Act, a broader piece of legislation that he plans to introduce as a replacement to Dodd-Frank.
"I look forward to working with Chairman Hensarling, R-Texas, and my colleagues on the Financial Services Committee during consideration of the Financial CHOICE Act to ensure these important reforms make it across the finish line," Neugebauer said.
