Senate allows swipe-fee limits
By Paul Tash
Montana Tavern Times
The controversial proposed amendment by Montana Sen. Jon Tester and others to block new limits on the “swipe fees” that banks and credit cards charge stores for debit-card transactions was rejected in June by the U.S. Senate in a close vote.
The limits now are scheduled to take effect July 21.
The Montana Tavern Association sent a letter of opposition to Sen. Tester, Sen. Max Baucus, and Rep. Denny Rehberg asking them all to oppose the amendment.
That amendment would have delayed for a year the implementation of the swipe-fee limit, called the Durbin Amendment. The national American Beverage Licensees organization also opposed delaying the swipe-fee limits.
In response to MTA's expressed opposition, Tester personally called MTA's legal counsel Mark Staples about the matter, sent his chief of staff also to personally explain the Senator's position, and also placed an editorial and question and answer piece in the Montana Tavern Times. Neither Baucus or Rehberg responded to MTA's letter.
MTA board member Darrell Keck praised the Senate action that now will allow quick implementation of swipe fee limits.
“It's going to help us,” he said. “It's a good deal for all retailers.”
He said many customers don't even carry cash any more, and just use debit cards. And the profit margin on small sales can really take a hit when a customer uses a debit card.
“The swipe fee is the same for a $3 drink as it is for a $200 dinner,” he said.
Fifty-four senators voted for Tester's amendment, but it fell six votes short of the 60 needed to clear a procedural hurdle.
Tester said that he believed placing a ceiling on debit card swipe fees would reduce a key revenue stream for small rural banks, while savings for merchants wouldn't necessarily be passed on to consumers.
“Despite earning a majority of votes, the Senate today missed an opportunity to stand up for consumers, small businesses and community banks in rural America,” Tester told the Associated Press after the 54-45 vote for his amendment.
Currently, businesses are charged an average of 44 cents per transaction involving a debit card, according to central bank estimates. The Wall Street Reform Act through the Durbin Amendment limits that fee to 12 cents per transaction for banks with more than $10 billion in assets.
Given the exemption for banks with assets of less than $10 billion, all but a few banks in Montana would be exempt from the limit, but the Montana groups supporting the Durbin Amendment argued that Montana's smaller banks would nevertheless still be affected by the limit because they'd have to lower their swipe fees to compete with the larger banks being forced to lower theirs.
The battle over swipe fees had been one of the most contentious ever engaged by the American Beverage Licensees, of which the MTA is an affiliate, said ABL executive director John Bodnovich.
The June vote paves the way for the Federal Reserve to move ahead in making its final rules for implementing reforms that require debit card swipe fees to be “reasonable and proportional” to the actual costs of processing debit card transactions. With a deadline of July 21, the final Fed regulations are expected to be released any day.
The Federal Reserve Bank estimates that debit card transaction fees generate $16 billion a year in revenue for banks and credit card companies. The limit would reduce that amount by as much as 70 percent.
Montana banks supported Tester and questioned whether retailers would pass on to consumers any part of the “windfall” they'd receive with the mandated lower swipe fees.
Steve Turkiewicz, president of the Montana Bankers Association, told the Associated Press the banks also will look at their businesses to see how they might recover some of the lost revenue because of lower swipe fees.
Banks have said they may raise fees on other items, such as checking accounts, to make up the difference.
Nineteen of the Senate's 51 Democrats voted for the measure to postpone reducing the fees, including Montana Sens. Baucus and Tester. 35 Republicans voted for the measure.
MTA’s Staples said,“That's about as pure a demonstration of democracy at work as you'll ever see. The financial institutions were convinced of the rightness of their arguments and the retailers of theirs. I have no doubt Sen. Tester sincerely thought he was doing what was best for Main Street, Montana businesses. That we disagreed with him on that one issue doesn't mean we disrespect him.
“Montana retailers, bankers, credit unions, and our congressional delegation all have a lot of work to do together for the betterment of our state. One debate isn't going to diminish our sense of common cause. I believe our respectful and cooperative relationships remain intact. The issue is settled; it's time to move on.”