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Banker, retailer fee feud is far from over
Time may heal all wounds, but the two sides of last year’s fiercest lobbying battle are still feeling the sting from that clash over debit card fees.
One year after Congress opted not to delay the highly contentious “Durbin amendment,” the banking and retail industries are still jabbing at each other on the matter, as both are eyeing the next round of the fight.
For months, the bankers and retailers each lobbied lawmakers hard on the matter, with both contending that they had the best interests of consumers in mind, while the opposition was simply seeking to reap hefty profits.
Ultimately, the banking industry came up six votes short in the Senate on a bill from Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) that would have delayed those caps.
Following that defeat, the Federal Reserve set caps that were roughly half the average amount previously charged for the transactions — but the banking industry got a late win as the final cap was roughly twice the size of the original proposal.
The fee limits have been in place since the beginning of October, but even now the two industries still disagree on the impact of the Durbin amendment.
“By and large, it’s working pretty well,” said Mallory Duncan, senior vice president for the National Retail Federation.
“Unmitigated disaster,” said Richard Hunt, president of the Consumer Bankers Association. “It’s actually worse than we thought.”
Months since the standoff captivated Capitol Hill, the two sides are still eager to spar, as they continue to make the case for the law, while chipping away at counterarguments from the other side.
Duncan says that while banks issued dire warnings of what would happen if the limits went into effect, they have not actually materialized. For example, smaller banks were exempted from the limit under the law, but the financial industry — and even some regulators — expressed concern that market forces would pull down the exempted banks anyway. But a study from the Fed released in May found that, so far, fees charged by the exempted banks have held steady.
“The members are looking out, they’re looking at this, and they’re seeing that, despite multiple Chicken Littles, the sky did not fall,” he said. “Their parade of horribles is finally petering out.”
Meanwhile, Hunt says the new limits are having precisely the impact that banks were afraid of, saying that the revenue hit from the lowered fees are forcing banks to trim benefits for customers and charge new fees to make up for the difference.
“Unfortunately, we’ve had to pass the cost on to consumers, as we said we would,” he said.
And he contends that retailers have yet to prove their claim that the savings on the fees will be passed on to consumers.
“The only reason the retailers did it was to line their own pockets. Period,” he said.
Duncan disputes that argument, saying that profit margins at retailers have held steady since the limits took effect.
Part of the reason the two sides are still so eager to spar on the issue is because both of them are already looking at the next round. For retailers, they are hoping to take the limits set on debit card fees and apply them to credit cards.
“Maybe it’s time for us to think about what do we do about transparency on credit card swipe fees,” Duncan said.
Banks are well aware of the retailers’ plans, and are already pushing back. At the same time, they are hoping at some point to renew their case for a repeal of the Durbin amendment, a sign that last year’s lobbying battle will not be put to rest any time soon.
“There’s more of a likelihood that debit interchange will be repealed than credit interchange will be passed,” Hunt said. “We secured 54 votes last time. We’re much closer to 60 than they are.”
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