HELENA — On the eve of a Senate vote on his proposal delaying limits on “swipe fees” charged by banks on debit cards, U.S. Sen. Jon Tester, D-Mont., offered a compromise Tuesday — but retailers supporting the limits don’t see it that way.
Tester’s compromise measure would delay for one year, instead of two, implementation of the swipe-fee limit, while the Federal Reserve Board and other agencies study its impact on banks.
“Working together across party lines, we’ve found common ground and agreed on a plan that actually fixes the problem with a balanced approach,” Tester said in a statement. “This new bill is good for Montana’s consumers, it’s good for small businesses and ... helps keep community banks on Main Street in rural America without unraveling the reforms we need for Wall Street.”
But retailers, who say banks are charging fees far beyond the cost of processing debit-card charges and gouging merchants and consumers, said Tuesday that Tester’s latest proposal is “a sham” and no compromise.
“It is a sham intended to kill swipe-fee reform even more quickly than (Tester’s) original bill and should be seen for what it is,” said David French, senior vice president for government relations for the National Retail Federation.
The U.S. Senate may vote on Tester’s measure as soon as Wednesday. Sixty votes may be required to break a filibuster on the issue before approving it.
If the Senate and the full Congress approve the measure, a new limit on debit-card swipe fees set to take effect July 21 would be delayed for a year.
The swipe-fee limit is a multibillion-dollar battle between banks, who charge the fee for use of debit cards, and retailers, who pay it. The limit would reduce fees by an estimated 70 percent, or $14 billion a year, retailers say.
As directed by 2010’s financial-reform bill, the Federal Reserve determined that the fee should be no more than 7 cents to 12 cents per transaction — as opposed to an average of 44 cents per transaction in 2009.
The limit would not apply to banks with less than $10 billion in assets, exempting nearly all Montana banks.
But Montana banks are opposed to the limit, saying they’d end up having to comply with it to compete with larger banks that are forced to charge the lower fee.
Steve Turkiewicz, president of the Montana Bankers Association, said Tuesday the limit would set fees that are less than the costs incurred by many Montana banks that issue the cards and process the transactions.
“We feel that we should not be providing the debit-card network and all that is involved with it, and lose money, every time the card is swiped, due to a federal price-fixing mandate,” he said.
Tester’s new measure, which is co-sponsored by Democratic and Republican senators, says the Federal Reserve and other agencies must study “all fixed and incremental costs” associated with debit cards, as well as whether the exemption for smaller banks would realistically allow them to charge higher fees.
If the study shows the current rule didn’t take into account the “fixed and incremental costs” or that the exemption wouldn’t work, the Fed must devise a new rule on swipe fee limits.
Retail groups maintained that directions for the study would allow banks to include many costs as debit-fee costs that are not actually debit-fee costs, and thus inflate the allowable fees.