Congress on the verge of passing major new interchange fee reform

Congress on the verge of passing major new interchange fee reform

Congress is a step away from passing major new regulations on fees retailers pay to banks and credit unions that issue debit cards.

House lawmakers said Monday that they support most of the core principles of new regulations on so-called "interchange fees" that passed the Senate in May. Banks and credit unions have lobbed hard against those new regulations.

House and Senate lawmakers are in the process of reconciling differences in a 2,000-page bill regulating Wall Street.


The House on Monday proposed an amendment to the provision, but did not push to remove it entirely during conference proceedings.

Senate Majority Whip Dick DurbinDick DurbinMcConnell warns Schumer cutting off debate quickly could stall infrastructure deal Congress should butt out of Supreme Court's business Inmates grapple with uncertainty over Biden prison plan MORE (D-Ill.) pushed hard for the Federal Reserve to be able to set "reasonable and proportional" fees. Durbin won his battle on a 64-33 vote in the Senate. The House-passed legislation did not include regulations on interchange fees, which have been loudly opposed by credit unions and small banks.

“I’m pleased that we were able to reach an agreement which makes minor changes to strengthen consumer protections and bring competition to a market where there is none,” Durbin said in a statement. “Most importantly, we’ve addressed the concerns of states regarding their ability to provide services to the unemployed and the concerns of small financial firms regarding their ability to provide services to the unbanked. We’ve exempted states from interchange regulations and have included protections to ensure those who can least afford it are protected from unnecessary fees. These changes make a strong amendment stronger and I urge all conferees to support them.”

The banking industry blasted the House offer and said it would represent a "terrible" deal for consumers.

The House amendment includes an exemption for government administered payment programs that use debit cards. State treasurers had raised concerns that the regulations would hurt their ability to disburse healthcare and other benefits.

Among other changes to the language, the amendment would:

— exempt network fees (those that flow only to Visa and MasterCard) from Federal Reserve regulation on reasonable and proportional costs. The Fed would have power to regulate network fees so they are not used to circumvent interchange fees.

— provide greater scope for the Fed to adjust fees for banks that argue the fee is necessary to help prevent fraud.