Payments-industry lobbyists late this week began the uphill effort of trying to eliminate an amendment from the financial-reform bill the Senate passed May 20 that would enable the Federal Reserve to control debit card interchange rates.
Their goal is to persuade lawmakers during the process of reconciling House and Senate versions of the bill that the interchange amendment contains more harm than benefits for consumers. The House version does not contain a similar amendment.
“We’re working hard to make sure the amendment is not ultimately included in the financial-reform bill,” says Trish Wexler, a spokesperson for the Electronic Payments Coalition, which represents most major card issuers and payment networks. Payments-industry representatives are meeting this week and next week with lawmakers and members of the House Financial Services Committee to discuss the amendment’s potential effect, she tells PaymentsSource.
“The amendment is very flawed and could bring a lot of harm to consumers and smaller financial institutions, and our goal is to show lawmakers its many unintended consequences,” Wexler says.
On a positive note for some payments-industry players, a separate amendment that would have given the proposed Consumer Financial Protection Bureau authority to set ATM surcharge fees did not survive the final version of the Senate bill (see story).
Card issuers and payment networks are focusing their attention on the potential harm to consumers from the debit-interchange amendment, now part of the Senate’s final version of the Restoring American Financial Stability Act. Banks with assets of less than $10 billion would be exempt.
Besides enabling the Fed to set debit-interchange rates, the amendment also would let retailers prohibit card use for transactions below a certain amount and would enable them to give customers incentives for using card networks with lower fees than others. Sen. Dick Durbin, D-Ill., on May 6 introduced the interchange-related amendments (see story). Durbin later made revisions, producing a single amendment the Senate approved May 13 (see story) .
In a May 21 statement, MasterCard Worldwide urged lawmakers to reject Durbin’s amendment, which the network said would “make debit costlier and shopping more complicated for consumers, while letting merchants reap the benefits of card acceptance at bargain-basement prices.” Likely repercussions from the amendment’s passage would be higher annual card fees, per-transaction charges to use a debit card and, for many consumers, the end of free checking accounts, Noah Hanft, MasterCard general counsel, said in the statement.
Consumers also would be forced to spend more than they had planned “if they don’t have cash in their pocket and the merchant enforces a minimum (payment amount) at the register, or they could be told the merchant doesn’t accept their chosen card anymore,” he said.
Visa Inc. in a May 20 statement said the Durbin amendment could harm consumers by increasing overall banking costs and reducing debit card benefits. “Consumers could have less choice, higher costs and could experience an increase in costs for checking accounts and online-banking fees and reduced debit card benefits like fraud protection and rewards,” Visa said.
The amendment also gives retailers the power to set “arbitrary” minimum-purchase requirements for consumers choosing to pay with plastic, which means some consumers might be forced to add items onto their shopping list so they may use a debit card. “This could be especially devastating for those on a fixed income who rely on prepaid cards for government disbursements such as Social Security,” Visa said.
In an earlier statement, the American Bankers Association said the debit-interchange amendment is a “big concern for banks of all sizes because it directly inserts the government into a price-fixing role and mandates competitive inequities in the marketplace.”
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