- The Washington Times - Tuesday, June 7, 2011

A heavily lobbied showdown over financial reforms that would cap “swipe fees” — the charge banks assess merchants to accept their customers’ debit cards — comes to a head in the Senate on Wednesday, with both sides claiming to have consumer interests at heart.

In a move supported by the banking industry, the Senate is set to vote Wednesday afternoon on a six-month delay of the caps to give the Federal Reserve more time to study potential impacts on banks, retailers and consumers.

If the Fed determines there would be a negative impact, it would get another six months to rewrite the rules.

But merchants groups and Sen. Richard J. Durbin, the Illinois Democrat who introduced the caps last year, are adamantly opposed to any delay.

If Mr. Durbin is successful in defending the legislation, the swipe-fee caps go into effect July 21, when the Federal Reserve’s proposed 7- to 12-cent caps on each transaction would kick in, cutting bank profits on debit cards by as much as 80 percent, or about $16 billion a year.

“Let us, at the end of the day, finally, finally, finally stand up for consumers,” Mr. Durbin said.

The debate has split Republicans and Democrats, with lawmakers from both parties taking sides.

Proponents of the delay say the proposed caps are too narrow because they only consider the immediate transaction costs to banks that issue credit cards and not the other expenses they incur.

“If you were selling pizzas in a pizza restaurant, a retail establishment, and you were told that the only thing you could do is charge for the dough that went into the pizza, nothing else, none of the rent, none of the other costs that go with operating your facility, obviously you wouldn’t be in business very long,” said Sen. Bob Corker, Tennessee Republican, who is pushing for the delay, along with Sen. Jon Tester, Montana Democrat.

Banks agree. They believe a study would prove their point.

“We think it’s only fair that we can recover all our costs,” said Richard Hunt, president of Consumer Bankers Association.

But opponents say the bill would do much more than delay the rules, claiming it would change the language and make it easier to overturn the swipe-fee caps altogether.

“The banks are trying to get Congress to delay this so they can eventually kill it,” said Ed Mierzwinski, spokesman for U.S. PIRG, a consumer group.

“This is written by banks for banks,” said David French, senior vice president of government relations at the National Retail Federation, which is in favor of swipe-fee caps. “This is not about what it costs banks to run a swipe. This is about how banks can generate more revenue from unsuspecting consumers.”

The debate will come to a climax Wednesday. Mr. Durbin said it’s all about priorities.

“They’re either going to be on the side of the banks and credit card companies or be on the side of consumers and businesses,” he said.

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