WASHINGTON–Both Democrats and Republicans who opposed the Federal Reserve Board’s cap on debit card interchange fees pledged March 21 to stand with community banks and credit unions that are trying to avoid the price limits.
Issuers with less than $10 billion in assets are exempt from the caps.
In separate speeches to credit-union officials, Senate Banking Committee Chairman Tim Johnson, D-S.D., and Rep. Barney Frank, D-Mass., the top Democrat on the House Financial Services Committee, both expressed concern about the rules, which capped debit card interchange at 21 cents per transaction, plus a few more cents to cover fraud and certain other issuer expenses (see story).
Speaking to the same audience, Rep. Jeb Hensarling, R-Texas, went a step further, promising that he will try to repeal the provision, which was added to the 2010 Dodd-Frank Act by Sen. Richard Durbin, D-Ill.
"I can tell you it's one of my top priorities in life to kill the Durbin amendment," said Hensarling, who is considered a leading candidate to chair the House Financial Services Committee next year, in remarks to the Credit Union National Association's annual conference in Washington.
Industry representatives acknowledge the small-issuer exemption is working so far, although some worry smaller institutions could still feel blowback from the cap. But they are also concerned now about another part of the Durbin amendment on network-exclusivity rights. Starting April 1, merchants will have greater say over which network clears a debit payment (see story).
Last year, another legislative battle was waged over the issue when Sen. Jon Tester, D-Mont., pushed legislation to delay the price rules from the Fed, which had been authorized by Dodd-Frank to implement the cap. Even though Tester's effort failed, he said March 21 he has not stopped following the issue.
"I still have concerns, since there's no guarantee that small institutions can effectively be protected," Tester said in a speech at the Credit Union National Association conference. "I do not believe that credit unions caused this financial crisis, and I do not believe that you should have to pay for the sins of Wall Street."
Johnson pledged in a videotaped address to monitor the impact of the new rules on small financial institutions, while Frank reminded the audience that, although it was included in the same reform law bearing his name, he had opposed the Durbin amendment.
"The argument was that that was necessary to protect consumers from excessive bank charges, except it protects retailers," Frank said. "I doubt very seriously that they will be able to show that there was any consumer benefit whatsoever."
The interchange-fee cap is that rare issue uniting banks and credit unions, but other speakers touched on more divisive topics. Rep. Ed Royce, R-Calif., advised credit-union officials on how in meetings with lawmakers to advocate for his bill raising the business-lending cap for credit unions. The bill is a flash point between the banking and credit-union industries.
Royce stated, for example, that credit-union officials should make the case that allowing their institutions to make more small-business loans would help them diversify their balance sheets and therefore better manage risk.
"That's an argument that you need to be prepared to make to members," he said.
At the conference March 21, organizers were distributing a three-page handout on how to respond to a list of questions about the credit-union bill that the Independent Community Bankers of America recently distributed to congressional offices.
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