Senate OKs cap on debit fees

Retailers happy, bankers say they may be forced to raise other fees

The Senate sided with retailers over bankers Wednesday, voting to let the Federal Reserve move forward with a plan to cap the “swipe fees” the financial institutions charge merchants to accept their customers’ debit cards — but it is still unclear what impact the decision will have on consumers.

Merchants say the swipe fees — the highest in the world — if left uncapped would force them to raise prices for all consumers. But the financial institutions that lobbied hard against the caps warned that the loss of revenue will force banks to raise fees on other services.

“It’s a win for consumers to take a broken market and fix it,” said Ed Mierzwinski, spokesman for U.S. Public Interest Research Group, a consumer organization. “I’m excited that consumers may finally begin to benefit from reduced swipe fees.”

Last year, Congress voted to cap debit card fees as part of a financial reform bill that President Barack Obama supported.

The Federal Reserve, citing a study that showed the transaction costs 4 cents to process, proposed a 7 cents to 12 cents cap per transaction.

**FILE** In this photo from Nov. 2, 2009, a customer swipes a MasterCard debit card through a machine while checking out at a shop in Seattle. (Associated Press)

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**FILE** In this photo from Nov. 2, 2009, a customer swipes a ... more >

But intense lobbying efforts by banks convinced a bipartisan group of senators, led by Sen. Bob Corker, Tennessee Republican, and Sen. Jon Tester, Montana Democrat, to push for a delay to the law.

The Senate voted 54-45 in favor of their proposed delay, but they needed 60 votes — leaving the caps to go into effect, as planned, on July 21. Lawmakers are still waiting on the Fed to finalize the rules.

“Let us, at the end of the day, finally, finally, finally stand up for consumers,” Sen. Richard J. Durbin, the Illinois Democrat who introduced the caps last year and opposed the delay. He warned lawmakers that a vote in favor of the delay would be like giving a “big sloppy kiss” to banks.

Still bitter over the defeat of his “delay and study” bill, Mr. Corker said price fixing is not American.

“We don’t live in a country where price fixing is typically the way we deal with issues,” he said.

Retailers breathed a big sigh of relief when the caps survived Wednesday’s vote: Right now, they pay an average of 44 cents per transaction. If a customer only buys a candy bar or a drink at a gas station, that eats up about half of the revenue.

“The long road toward interchange reform can continue on,” said David French, senior vice president for government relations at the National Retail Federation. “Our little speed bump is over, and now we can move on to the next fight.”

For the National Retail Federation, the next fight is extending these same interchange caps to the credit card industry, he said, which are even higher than those in the debit card industry.

But some wonder whether the retail chains will actually pass along the savings to consumers. Even if they do, consumers might not notice the price differences, when retailers would be saving only about 32 cents to 37 cents not on each product, but on the entire order.

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