Good news for retailers seems too infrequent these days, so here’s some: Yesterday, the Senate torpedoed an attempt to delay the debit card swipe fee reforms (see Dealer Outlook, Jan. 20, 2011 and April 26, 2011) mandated by last year’s Dodd-Frank financial reform act.
Senators Jon Tester, D-Mont., and Bob Corker, R-Tenn., attempted to delay for at least six months the Federal Reserve setting a cap on the monopoly-like swipe fees currently charged retailers. The Tester-Corker amendment, pushed by banking lobbyists, was attached to an Economic Development Reauthorization Bill. The vote was 54 to 45 to pass Tester-Corker, but it needed 60 votes for adoption. The failure to reach 60 is a victory for retailers.
According to Dodd-Frank, the Fed now faces a July 21, 2011 deadline for actual implementation of a cap. The Fed failed to meet a mandated April 21, 2011, deadline to issue new rules setting a cap on swipe fees to produce significant savings for retailers and consumers. Late last year, the Fed proposed flat swipe fees of 7 to 12 cents per transaction, a reduction of 70 percent or more than $1.2 billion a month currently charged retailers. As expected, the banks cried foul and turned to aggressive lobbying to kill it or, at least, get a long delay. Thus, the Tester-Corker amendment.
The provision in Dodd-Frank to set “reasonable” swipe fees came last year when retailers convinced lawmakers to give the Fed power to set such fees. Retailers cited excessive charges to them if a customer used a debit card versus no cost if the customer paid by check. They claimed the banks and companies that control the largest debit card networks, Visa and Mastercard, have consistently raised the fees even thought the market has grown rapidly and technology costs have plummeted.
Sen. Dick Durbin, D-Ill., was the lawmaker behind the proposal for swipe fee reform in Dodd-Frank. During debate on the Senate floor yesterday, Durbin defended the reform and argued that delaying it is akin to another bailout for big banks He specifically called out the three biggest banks that received TARP money and, he claimed, will benefit the most from the Tester-Corker amendment, namely Chase, Bank of America and Wells Fargo. Labeling the measure a "Baby TARP," Durbin said “you can’t vote at 2 p.m. for the pending amendment and say you are a friend of small business.”
Where things go from here is not all together clear. However, during the debate yesterday, Tester took the floor to push his amendment and stated the Federal Reserve has to follow the letter of the law and the intent of Congress. He said he hoped to avoid the current situation where there is slightly more than one month until the implementation date (he apparently forgot Dodd-Frank passed 11 months ago.) Tester pointed that the Fed cannot ignore implementing regulations or arbitrarily delay implementation.
Reportedly, the Fed has now indicated it intends to meet the July deadline. Therefore, all retailers should be alert for more information very soon.