Durbin Amendment in Danger of Delay

National Association of Convenience Stores, NACSOn Tuesday, Senator Jon Tester (D-MT) introduced a bill in an effort to delay implementation of the Durbin amendment.

The legislation, S. 575, introduced on March 15, seeks to delay — for two years — critical reforms aimed at providing relief to America’s small-business owners. The reforms, scheduled to take effect this summer, would limit the price-fixing done by the nation’s largest banks so that they would be required either to compete on their debit card swipe fees or charge an amount that’s “reasonable and proportional” to their costs.

“This bill is just another Wall Street bailout,” said NACS Vice Chairman of Technology Pat Lewis, who operates 13 Oasis Stop N Go convenience stores in Idaho. “The Tester bill is TARP 2, when the last thing we need is another handout to the big banks.”

“Congress should be standing by Main Street and not kowtowing to Visa, MasterCard and the big TARP banks that three years ago brought our economy to its knees and whose executives last year, in just nine months, were paid more than $130 billion,” said NACS Senior Vice President of Government Relations Lyle Beckwith.

“Interfering with the process even before the final rule is written is nothing more than pandering to the giant banks,” added Jennifer Hatcher, senior vice president of government and public affairs for the Food Marketing Institute. “Delaying swipe fee reform has consequences that will cost merchants and their customers $1 billion each month, and will cost our economy up to 95,000 much-needed jobs each year. Killing jobs isn’t what we were promised in November.”

On December 16, 2010, the Federal Reserve issued a proposed rule, as directed by Congress in the financial services reform bill, to issue rules to ensure that debit swipe fees are reasonable and proportional to the processing costs incurred. The Fed also asked for public comments to the rule, which are expected to be finalized on April 21 and implemented by July 21.

The Fed’s proposed rules would still allow banks to make a reasonable, if not sizable, profit on debit transactions. The Federal Reserve did not seek to eliminate debit swipe fees, but to define a rate that was fair and equitable, with proposed per-transaction rates of 7 cents or 12 cents. A survey of banks by the Fed found that debit swipe costs averaged around 4 cents per transaction, providing the banks with a profit margin of either 75 or 300 percent based on the proposed rulemaking.

Tester has said that he is concerned about small banks being hurt by the rules. However, Durbin took care of that concern last year as part of the amendment that was approved by Congress. The legislation states explicitly that banks with under $10 billion in assets will be exempted from the rates. Further, Visa, Star and five other networks have indicated they will support two-tiered pricing to allow small banks to charge more than big banks.

Because of honor-all-cards rules in debit and credit card contracts, retailers are prohibited from treating one debit card differently than another debit card.

“Congress voted last summer to fix a clearly broken system, and the Federal Reserve made significant, thoughtful proposals to do so,” said Armour. “This bill seeks to preserve the anti-competitive behavior of the banks and credit card companies and is not what 5.4 million of our customers had in mind when they signed their names to petitions demanding reform.”

Swipe fee reform would add jobs and transfer funds directly from banks to consumers according to “The Costs of Charging It in America: Assessing the Economic Impact of Interchange Fees for Credit Card and Debit Card Transactions,” a report released last month by Robert Shapiro, former under-secretary of Commerce for Economic Development. Extrapolating the findings for debit swipe fees alone, swipe fee reform would add 90,000 new jobs and provide $10 billion in relief to consumers.

“While Congress talks about the importance of revitalizing the economy and growing badly needed jobs, those [in Congress] supporting today’s bill are instead siphoning consumers’ hard-earned wages to the banking industry,” said Armour.


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