Regulation

Banks Gear Up To Battle Debit Fee Limits

U.S. banks are revving up to take on a big lobbying battle with the goal of ending limits on debit card fees that they claim fail to really help consumers. They also allege that the limits have added up to a $42 million windfall for retailers over the last several years.

The move comes as the Trump administration and Republican-controlled Congress are taking a new — and critical — eye toward the Dodd-Frank legislation in all its parts.

The American Bankers Association is specifically fighting the Durbin amendment, which limits the fees that banks charge retailers on debit card transactions to be “reasonable and proportional.” The restrictions do not apply to credit cards.

“Losing the revenues on the debit cards is a big deal for banks,” said Rodgin Cohen, senior chairman of the law firm Sullivan & Cromwell. “This is a very high priority for the industry. The regulatory burden consists not only of increased costs, but suppressed revenues.”

But this will not be an easy fight, since retailers are not exactly going to take an uptick in swipe fees lying down.  Some banking lobbyists feel that the chances of ending debit restriction are almost nil — though they remain hopeful that part of Dodd-Frank can be scaled back some.

Retailers argue that the capped fees create savings that merchants can then pass back to consumers.

Mallory Duncan, general counsel at the National Retail Federation, has also noted that  banks had tried several times to repeal Durbin without success.

“They [banks] have an uphill battle to convince members of Congress that removing competition is a good idea and that they ought to be allowed to go back to hidden, monopolistic fees.”

But bankers have their supporters in this debate as well — notably Jeb Hensarling, who chairs the House financial services committee.  Hensarling is widely expected to introduce legislation to effectively kill Durbin when he introduces his financial choice act, which would undo large parts of Dodd-Frank. However, Hensarling’s enthusiasm may not be shared by his fellow Republicans, who do not relish a pitched battle between banks and retailers over fees.

“This is forcing members to choose between two of the most powerful political constituencies in their districts [banks and retailers]. Why would they want to do that?” noted Charles Gabriel, president of the policy analysis group Capital Alpha.

However, Gabriel did go on to note, “You’ve got this green light now, with Trump having won. You kind of have to try this. The [finance] industry has a chance to play offense.”

James Ballentine, executive vice-president of congressional relations at the American Bankers Association, said: “We will make the necessary investments to make sure victory is achieved.”

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