As a Dodd-Frank replacement bill heads to the cutting room Tuesday, one controversial provision looks likely to end up on the floor: the repeal of the Durbin Amendment, which caps the transaction fees that debit card issuers can charge merchants.
The House Financial Services Committee is set to mark up the replacement bill — the Financial Choice Act — nearly a year after a first draft was unveiled. Language to repeal the Durbin Amendment, which assigns a limit to card swipe fees and the payment of those fees to the banks, has survived until now, but comments from the committee’s chairman, Rep. Jeb Hensarling, R-Texas, have cast doubt on the repeal surviving much further.
Two financial industry CEOs and three industry lobbyists told CNBC that they have been informed in recent months by either Hensarling himself or a member of his staff that the repeal will not be part of the final bill.
In a briefing with reporters Thursday, Hensarling signaled that the future of the amendment is unclear, while acknowledging that the division over the amendment doesn’t neatly match party lines.
“I know that we have members on both sides of the aisle that may be a little conflicted on the issue. … We’re still listening,” said Hensarling, who added that he is “convinced that we will get the Financial Choice Act passed, regardless of the outcome of Durbin.”
Republicans who oppose the original amendment and support its repeal do so because they don’t believe the government should be in the business of setting prices, but disagree over who should bear the cost.
Retailers vs. the banks
The issue has not only split political parties, but industries, too. Retailers and restaurants have pushed to keep the amendment as is, since changing it would cause them to shoulder more of the transaction cost.
Banks have pushed to repeal it, arguing it’s not the government’s place to make markets.
One bank CEO in March signaled that the industry would lobby hard to repeal it.
“They’ll fight their fight, and we’ll fight ours,” that CEO said, referring to the retail industry’s lobbying effort. “We’ll see what happens.”
In a letter to Congress ahead of the markup, the CEO of the Consumer Bankers Association said, “Evidence clearly demonstrates the Durbin Amendment has resulted in a $42 billion windfall for merchants and little if any savings for consumers.”
When the amendment was introduced as an extraneous add-on to Dodd-Frank — just following the financial crisis — lawmakers didn’t mind hitting the reputationally damaged banks with added fees.
The National Restaurant Association, in pushing to keep the amendment, sought to stoke those sentiments.
“After taking billions in bailouts from taxpayers, the country’s biggest banks now want to put a debit card tax on consumers and small businesses — all to fatten their own bottom line,” Leslie Shedd, vice president of communications, said upon the industry’s rolling out a multimedia campaign in March against the repeal.