Durbin fights to keep card provision from being swiped out of Wall Street bill

Sen. Dick Durbin (D-Ill.) is going on offense to ensure his crackdown on debit card fees remains in Wall Street overhaul legislation.

Durbin, the majority whip, isn’t one of the 43 House and Senate lawmakers putting the final touches on the Wall Street bill, but he is waging a vocal campaign from the sidelines so his provision isn’t swiped at the last minute. 

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The “interchange fee” issue is among the toughest battles remaining in a 2,000-page financial overhaul lawmakers intend to finish this month and send to President Barack Obama. Durbin’s legislation, which passed the Senate in May, divides the business community between merchants and banks.

The legislation would direct the Federal Reserve to set “reasonable and proportional” fees paid by merchants and retailers to banks and credit unions that issue debit cards. The House legislation, passed in December, did not include a related provision.

Ever since his seven-page amendment passed on a 64-33 vote, Durbin has pushed back hard on lobbying efforts to weaken the provision or remove it entirely. 

He has sent letters calling out lobbyists for misrepresenting his legislation. At a hearing last week on antitrust concerns, Durbin took aim at Visa and MasterCard, the payment networks that set fee rates. On Wednesday, Durbin called a hearing of his Senate Appropriations subcommittee on financial services to look into the impact of the fees on the federal government.

“If we do not take steps to reasonably regulate this system, a dollar won’t be worth a dollar anymore — it will be worth whatever Visa and MasterCard want it to be,” Durbin said Wednesday. “We will literally cede control of America’s currency to the Visa and MasterCard duopoly.” 

Durbin released a report at the hearing showing that Treasury could save between $36 million and $39 million each year if the department had stronger negotiating power with the card networks.

And he is taking steps to divide the opposition. Durbin said he is planning an amendment to exempt cards that states use to disburse healthcare and other benefits. Some state treasurers argued his amendment would hurt their ability to distribute money.

After the two-hour hearing, Durbin said he is open to some changes in the way costs are defined in the legislation, but he is concerned about opening any loopholes related to fraud issues. 

“They’ll just call everything fraud and increase interchange fees to fight fraud,” Durbin said.

For most of the meeting, Durbin sat alone on the dais in front of a packed room of lobbyists and spokesmen on both sides of the multimillion-dollar lobbying scrum. The conference committee lawmakers were across the capitol, working through investor protection and Federal Reserve auditing issues.

Durbin has been aided in the fight by a strong lobbying effort from merchants and retail interests and members of the House, including Rep. Peter Welch (D-Vt.). House Financial Services Committee Chairman Barney Frank (D-Mass.) said last Thursday that he expects the amendment to remain in the bill, but said some changes are possible.

Meanwhile, banks and credit unions have waged a massive effort against the provision. The National Association of Federal Credit Unions (NAFCU), Independent Community Bankers of America (ICBA) and Credit Union National Association (CUNA) have all pushed back hard on the measure. The Electronic Payments Coalition serves as an umbrella organization of financial firms against the amendment.

“Visa is proud of the role digital currency plays in helping federal, state and local governments better meet the needs of their citizens, from providing a better way to distribute social benefits to making government purchasing more efficient and transparent,” Visa said in a statement.

Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Texas), meanwhile, are organizing lawmakers in opposition. They released a letter on Wednesday citing “grave concerns” with the legislation and said it would “devastate” community banks and credit unions.

The letter is signed by 131 House members, including 71 Democrats and 60 Republicans.

“Under the Senate amendment, consumers lose,” Wasserman Schultz said.