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Nearly seven months after passing a bill that included a measure to limit interchange fees on debit cards, lawmakers on Thursday were expressing buyer's remorse.
February 17 -
Speaking at the annual ICBA convention, Ben Bernanke assured community bankers the Fed will attempt to protect them as it finalizes its rule capping debit interchange fees.
March 23 -
Banks with assets of less than $10 billion are exempt from the Dodd-Frank Act's restrictions on debit interchange, but even those who are exempt from the law are still bracing for what they see as its inevitable effects on their checking accounts and other operations.
September 6
WASHINGTON — Sen. Dick Durbin is working behind the scenes on a new effort to ensure that small banks are not being hurt by the cap on debit interchange fees.
The Illinois Democrat was the driving force behind last year's legislative provision that required the Federal Reserve Board to cap the fees that banks charge retailers on debit-card transactions.
Although the bill contained an exception for banks with under $10 billion of assets, both industry officials and regulators have argued small banks will still be adversely affected. Under one oft-cited example, Visa and Mastercard may be unwilling to operate a two-tiered system, one for large banks and one for small banks.
"There is good reason to be concerned about it," Fed Chairman Ben Bernanke said at a Senate hearing in May.
Now, Durbin has inserted language into a larger measure — which is expected to be adopted by the Senate by next week — that instructs the Federal Trade Commission to issue a report on how the small-bank exemption is working.
The FTC's report, which would be issued in late 2012, would explain whether FTC has found evidence that payment card network companies such as Visa and Mastercard have taken steps to make it harder for small banks to compete in the debit-card market with large banks. The report would also explore whether the payment card network companies have coordinated or colluded with large banks in an effort to put small banks at a disadvantage.
Durbin's latest move may reflect a belief that the FTC is likely to be tougher on Visa, Mastercard, and large banks than the Fed. Last year's Durbin Amendment instructed the Fed to develop the cap on debit interchange fees, but the Illinois Democrat later got into a public dispute with Bernanke over the likely success of the small-bank exemption.
"I don't think he trusts the Fed, so he's going to the FTC," said Richard Hunt, president of the Consumer Bankers Association, which opposes the cap on debit interchange fees, in an interview.
Durbin's office did not respond immediately to a request for comment on Tuesday.
The little-noticed provision that calls for a report by the FTC was written by Democrats on a Senate subcommittee that Durbin chairs. It is part of a spending package that would fund various financial regulators. That bill is expected to be merged with other spending measures and approved by the Senate later this week or early next week.
Under Senate rules, the FTC provision cannot be amended or removed when the spending measure goes to the Senate floor, according to a source familiar with the matter.
Consequently, opponents of the provision, who include lobbyists for large banks, will likely only have one chance to remove it. That opportunity will occur later, when the House and Senate merge their respective bills to fund financial regulators.
