(Updated 4:25 PM) It appeared the powerful and well-funded banking lobby was on its way to yet another victory, this time on the long-debated “swipe fee” issue. However, an effort, which had been gaining traction, to delay implementation of caps on interchange fees was turned back in the Senate Wednesday to the surprise of some.
Though mandated as part of the sweeping Dodd-Frank Act’s attempts at financial reform, the Federal Reserve’s plan capping interchange fees placed on retailers who accepted card payments appeared well on its way to facing a 12-month delay, at minimum. Following an intense lobbying effort from the banking sector that flipped several senators who voted for the caps initially, legislation by Sens. Jon Tester (D-MT) and Bob Corker (R-TN) that would delay the caps’ implementation, as well as require a six-month economic study to weigh issues such as unintended consequences on smaller banks and credit unions, came up for a vote. However, the Senate voted 54-45 to defeat the effort Wednesday, making it possible for the caps to go into effect this summer.
The mere attempt infuriated Sen. Richard Durbin (D-IL), who spearheaded the swipe fee cap legislation as an amendment to the Dodd-Frank Act last year before it was passed and inked into law. He characterized the move as capitulation to the mega-banks and credit card companies.
As part of the Dodd-Frank Act, the Fed unveiled a proposal that would set a maximum cap on swipe fees at $0.12 per transaction. The Fed estimated that merchants were charged, on average, $0.44 per transaction, and that revenue from said fees comprised somewhere between $12 and $16 billion for the financial industry in 2009 alone. The Fed noted the proposed regulations would establish standards that are more "reasonable and proportional to the cost incurred by the issuer for the transaction." But amid pressure for lawmakers like Tester and Corker, the Fed was forced to postpone the original deadline to have the final swipe fee proposal written, late April.
Capping swipe fees is seen as a significant victory for small businesses that saw the fees as unfair and a serious financial burden. Subsequently, the move, at best, would leave uncertainty at corporations such as Visa, MasterCard and backing financial institutions and, at worst, would have a severely negative impact on their revenue streams. For what it’s worth, the thinly-veiled message from the financial titans continually has appeared to be “We’ll get that money in one way or another.”
Brian Shappell, Staff Writer