After intense lobbying by the credit card industry, a bipartisan bill, the Debit Interchange Fee Study Act (S. 575), was introduced in the Senate that will delay reform on swipe fee laws that were set to go into effect on July 21, 2011 as a part of the Financial Reform Act. The postponement will delay the Durbin Amendment to the ‘Dodd-Frank Wall Street Reform and Consumer Protection Act’, and allow time for the U.S. Treasury to conduct a study on the impact to banks before enacting any limits on debit card swipe fees.
The bill is designed to cap interchange fees, also known as swipe fees, that banks can charge to merchants for processing debit cards. It would limit the fee to 12 cents, a major reduction from the average of 44 cents per debit card transaction. The new law could cut debit card fees by up to 70% and it’s estimated that banks would see a loss of up to $1 billion per month. According to Durbin, interchange fees on debit cards charged by Visa and MasterCard on behalf of its bank affiliates are worth over $1.3 billion per month and $16.2 billion annually. Over half of that amount goes to 10 major U.S. banks, he said.
The majority of supporters of the postponement are requesting a two year delay on implementing swipe card fee reform, while some are asking for only one year. Supporters include Rep. Barney Frank (D-MA), Sen. Jon Tester (D-MT) and Rep. Shelley Moore Capito (R-WV). Banks and debit card issuers oppose the new bill saying that they would not get substantial return on their investment by only charging 12 cents per transaction.
The debate over the laws impact on retailers vs. the financial industry won’t see a resolution until final legislation is put into action. The conversation will lead to a reduction in the fee cutback, leave the law as it was originally written or end up killing the swipe law altogether.
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