U.S. Senator Plans Bill to Kill Swipe Fee Reform

Senator Rand Paul tells his credit union constituents that he is planning to introduce legislation that would repeal the Durbin swipe fee reform amendment.

March 03, 2011

WASHINGTON - The theme of the day this week on Capitol Hill is interchange...and it??s not being touted from the merchant community.

This week the Credit Union National Association (CUNA) is hosting its annual Governmental Affairs Conference on Capitol Hill, sending more than 4,000 members to Senate and House offices with the association??s top agenda items ?" notably, and not surprisingly, killing debit card swipe fee reform.

Members of Congress from both sides of the aisle addressed participants about interchange fees yesterday morning, followed by CUNA members meeting with senators and representatives throughout the day.

Here is a sample of what some members of Congress said about interchange reform and why Congress should repeal the Durbin amendment contained in the Dodd-Frank financial services reform bill.

Rep. Ed Royce (R-CA) told attendees yesterday that the proposed interchange rule has left small financial institutions "holding the bag," according to CUNA??s website: "To ensure that small institutions are truly exempt, to ensure that fraud costs are truly accounted for, we have got to slow the process, study the issue and get this right in legislation...If we fail to do that, then the debit network is going to be weaker and small institutions are going to be at a disadvantage," Royce said.

House Financial Services Committee Chairman Spencer Bachus (R-AL) said his committee would work to decrease the impact of regulations on financial institutions, including the Durbin amendment. He noted that several of his Senate colleagues who voted for the provision are planning to go back to Sen. Durbin (D-IL) and speak with him personally.

"If we don??t get it [debit interchange] right, that credit union or community bank in your town isn??t going to be there and you will be left with larger institutions," said Bachus, according to the Credit Union Times.

Rep. Debbie Wasserman Schultz (D-FL) told attendees that the biggest threat to credit unions is capping interchange fees. "The interchange train may have left the station but it's not too late to stop it in its tracks," she said, according to CUNA??s Twitter feed.

Wasserman Schultz clearly stated her position on interchange fees, noting that the current rules are deeply flawed and must be fixed. However, she claimed that merchants would still charge the same prices for goods, while pocketing the savings from interchange reform.

Others members of Congress weighed in on interchange yesterday, including Rep. Ed Royce (R-CA), who said interchange should not have been added to Dodd-Frank act, and Rep. Steve Stivers (R-OH), who said the Federal Reserve??s interchange proposal "wasn??t done right," and that he supports stopping implementation and studying the impact on credit unions.

Meanwhile, CUNA President and CEO Bill Cheney testified yesterday before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit on the impact of the Dodd-Frank act, calling the regulation of interchange fees the most "chilling effect" of the law.

Cheney said that credit unions are urging Congress to start over and go back to the drawing board on debit card swipe fee reform: "Further study on this issue of the impact of debit interchange on small issuers and consumers is essential. Ultimately, the Board should be directed to issue a rule that includes meaningful enforcement authority for a two-tier system to protect small issuers, and to set standards for assessing interchange rates that take into consideration all of the operational costs associated with offer debit cards to consumers."

According to CUNA, Senator Rand Paul (R-KY) told constituents that he was introducing legislation to repeal Durbin. Senator John Tester (D-MT) has made similar comments this week.

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