In a temporary truce, credit unions and banks joined last week in a withering lobbying effort that effectively killed a bill aimed at lowering credit card interchange fees.
Though the House Judiciary Committee voted to endorse the bill, the vote was so close, 19-to-16, that almost nobody expects the panel to send the bill for a vote by the full House, thereby killing it for the year.
The close vote, said CUNAâs Chief Lobbyist John Magill, amounted to a victory, even though the committee passed the bill. âI donât think thereâs a real vision that this is going to move in the remaining days of Congress,â he said.
âThis is one of those few times when credit unions and banks worked hand in hand,â said Magill. âSomebody get a picture.â
âItâs very doubtful they will move it to the floor, meaning itâs dead for the year,â said Brad Thaler, senior lobbyist for NAFCU.
The two traditional foes teamed with MasterCard and Visa, which banks and CUs continue to control, to protect the fees they receive on credit and debit card transactionsâestimated at $42 billion last year. More than $3 billion of that went to CUs, making it an important profit center in this tough economy. The bill would have lifted antitrust restrictions and allowed merchants to band together to negotiate interchange fees directly with MasterCard and Visa, which currently set the rates as they control roughly 80% of the cards market. Critics say the rate-setting should be opened up to allow for such bilateral negotiations.
Last weekâs drafting session for the bill was filled with confusion among both Republicans and Democrats, several of whom used the talking points put forward by the banks, credit unions and Visa and MasterCard.
U.S. Rep. Debbie Wasserman-Schultz (D-FL), long an ally of CUNA, bucked the Democratic Chairman of the Committee, Michiganâs John Conyers, by offering what several committee members referred to as a poison pill amendment.
The amendment would have required that 100% of any savings accrued on interchange fees be earmarked for consumers, and not the merchants, who are leading the fight for lower interchange fees. Several members noted such a requirement would make the bill worthless for merchants to pursue lower fees. âYouâve eliminated the entire point of the bill,â said Democrat Jerry Nadler of New York.
Wasserman-Schultz then withdrew the proposal but suggested another amendment that would earmark interchange fee savings to pay for fraud losses on cards accrued by small banks and CUs. That amendment was also withdrawn.
Both positions were among key talking points issued by the Electronic Payments Coalition, the lobbying group financed by MasterCard, Visa and the banks and credit unions.
CUNA President Dan Mica sent a letter to all 40 members of the Judiciary Committee doubting whether a fee reduction that is the aim of the bill would be shared with consumers. âAny reduction in interchange is not passed through to the consumer. Only the merchants win,â Mica said in the letter.
In an extraordinary acknowledgment of the financial services lobby, lawmakers offered an amendment to the bill that would exempt CUs and small banks from the process. Itâs not clear what they would be exempted from because the bill does not contemplate a role for them in the negotiations anyway.
The credit unions position opposing efforts to reduce interchange fees puts them at odds with the consumer lobby. Though few of the leading consumer groups endorsed the bill, they all support efforts to reduce interchange fees. Linda Sherry, a spokesman for Consumer Action, said her group is concerned that more transactions are being made with plastic, for which an estimated 2% is added. âThe effect on consumers is that the interchange fees are getting built into the price of all goods and services more and more, so it affects even people who donât use credit cards,â she said. In addition, she said, increasing numbers of people in the declining economy are using their credit cards to pay for routine expenses to try and stretch the payments. âTowards the beginning of the year you saw a spike in credit card use.â
Travis Plunkitt, general counsel for Consumer Federation of America, said his group, which represents CUNA and NAFCU, supports the aim of the interchange bill but did not endorse it because they have questions on the structure. Last weekâs close vote, in which eight Democrats defected from their leadership, while some Republicans joined the Democratic supporters, makes it unlikely the Democratic leadership will bring the bill to the House floor, asserted Thaler.
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