House and Senate conferees have apparently reached an agreement on the controversial interchange amendment to the bank reform bill that would retain a provision establishing the Federal Reserve as a regulator of so-called swipe fees on debit card transactions, a measure that is avidly opposed by credit unions and banks.
The interchange amendment, which passed the Senate but was not in the House’s version of the bank bill, has apparently received enough support in the House after negotiators agreed to exempt all government benefits programs from the Fed’s price controls.
“This agreement is a major victory for small business owners and consumers fed up with big bank and credit card industry rip-offs,” said Rep. Peter Welch, D-Vt., a supporter of the interchange amendment. “It preserves key protections for the grocers, retailers and country store owners most affected by out-of-control swipe fees, while addressing legitimate concerns of the industry. I am confident this agreement will be approved by the full committee because every conferee represents small business owners who are tired of serving as a piggy bank for Visa and MasterCard.”
But credit unions and banks maintained their opposition. “This does nothing for us,” said NAFCU President Fred Becker, who said the interchange amendment ought to be removed from the bank bill and sent back to the House, where it was never voted, for further study. “We do have a compromise; it’s send it back and do this right.”
“Despite some improvements, this provision remains a terrible deal for consumers, for lower-income bank customers, for government benefits programs, and for community banks,” said Edward Yingling, head of the American Bankers Association, which has joined NAFCU, CUNA, Visa and MasterCard in an Electronic Payments Coalition fighting the interchange amendment. “It upends the existing payment system – a system that provides enormous value for consumers, merchants and banks alike – and essentially takes money out of consumers’ pockets and puts it in the pockets of big retailers.”
CUNA said unless the interchange amendment is removed it will oppose final passage of the bank bill – although it is clear the trade group’s opposition will not prevent final passage of the bill.
Though it is unclear how much the estimated $20 billion a year in debit-card fees paid by U.S. merchants would be reduced under Congress's proposal – or what impact consumers might feel – some experts believe they could be cut by half or more, vastly reducing this critical revenue flow to credit unions and banks.
Credit unions and community banks have been particularly opposed to the interchange amendment even though they would technically be exempt, contending that it would force them to lower fees in order to compete with larger banks.
The deal reached Monday would keep most of the Senate’s interchange amendment in the final legislation, but allows the Fed to look at a broader range of factors, including fraud prevention costs, when determining what fees card-issuing banks can charge.
The new language does relieve uncertainty for Visa and MasterCard by clarifying that the measure wouldn't restrict the fees that the debit-card processing networks charge to banks.
The legislation still only applies to debit cards, not traditional credit cards, and thus covers less than half of the annual $50 billion interchange fees U.S. merchants pay.
Separately, House and Senate conferees also appeared yesterday to have reached an agreement to house the new consumer financial protection agency inside the Fed.
Conferees have also reached full or partial agreement on measures dealing with credit rating agencies, private equity and hedge funds, and raising bank capital standards.