Bill could mean the end of swipe-fee reform


In a first step to jettison parts of the 2010 Dodd-Frank Wall Street Reform & Consumer Protection Act, the House Financial Services Committee on Tuesday voted for the Financial CHOICE Act of 2016. Dodd-Frank, you’ll recall, was Congress's response to the 2008 financial debacle.

Introduced by committee chairman Rep. Jeb Hensarling (R-Texas), the Choice Act (HR 5983) will now move on to the full House after an acrimonious committee 30-26 vote. As expected, the vote was strictly along party lines with no Democrats supporting it.

The bill is being pushed hard by the financial industry. Of particular interest to many of the nation’s retail business owners is the proposed elimination of the swipe-fee reform, aka the Durbin Amendment, which was included in the Dodd-Frank legislation.

In truth, retailers won a hard-fought battle for swipe-fee reform when the Durbin Amendment made it into Dodd-Frank. Even after the swipe fees, also known as interchange fees, were capped by the Durbin Amendment, the Visa-MasterCard duopoly still remains and the nation’s retailers and consumers still pay the highest swipe fees in the world, up to seven or eight times the European levels.

Without the protections of debit-card reform and the small measure of competition the reform has introduced to the market, consumers will face higher prices and smaller merchants will face even greater burdens.

"Make no mistake,” said Jennifer Safavian, executive vice president for government affairs for the Retail Industry Leaders Association, “the CHOICE Act's central objective is to turn back the clock on reforms that brought fairness and competition to the broken debit-card market. Repealing debit swipe-fee reforms would once again allow the largest banks and card networks to impose unjustifiable fees on merchants across the country while hurting everyone outside Wall Street.”

Arguably, the Retail Industry Leaders Association contends the swipe-fees that banks and card networks can now charge every time a debit card is swiped are "reasonable and proportionate to the cost of processing the transaction.” That’s due to the cap demanded in the Durbin Amendment.

But not everyone agrees. Many retailers and merchant associations contend the current fees are still higher than needed to cover the true costs of processing a debit-card swipe, which is what the Durbin Amendment mandated. However, all agree the reforms brought some competition to the market where card companies had previously blocked their competitors from having the chance to process debit-card transactions and price-fixed the fees big banks charged merchants for those transactions.

The Financial CHOICE Act includes much more than the swipe-fee issue, of course. There are claims it will weaken the reach of the Consumer Financial Protection Bureau by replacing its lone director with a commission. It would also give Congress much more authority over the financial regulators' budgets and the agencies would have more hoops to jump through to justify rules. Interestingly, in the last few days, Democrats, in particular, have become very vocal in defending the consumer in that current mess.

Overall, assuming the Choice Act sails through the House, its future when it’s handed over to the Senate is believed to be much more questionable. Perhaps it’s at that juncture that marine retailers will be called on to get engaged in convincing senators to keep the Durbin Amendment.


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