Sen. Jon Tester succeeded in bringing legislation to the floor that would undo a policy on how banks charge retailers when consumers use bank cards. It was approved as part of the Dodd-Frank financial reform legislation.
The vote Democrats have been dreading comes today when they’re forced to choose between two powerful constituencies — retailers and banks.
With more than $1 billion a month at stake, the banks are making a last-ditch effort to line up 60 votes for Sen. Jon Tester’s (D-Mont.) attempt to relitigate a law requiring a reduction of debit card swipe fees charged to retailers.
The battle has been notable not only for the massive lobbying campaigns on both sides but for the internecine fighting in the Democratic ranks.
Senate Majority Whip Dick Durbin (D-Ill.) has ripped Tester’s amendment as another “Wall Street bailout” even as Tester faces a difficult re-election test next year. Durbin authored the law, which was part of last year’s financial regulation overhaul.
And Senators on both sides of the issue, including Tester, have been the subject of heavy advertising campaigns in their home states.
Tester, however, has warned that without changes to the swipe-fee law, small banks could go out of business and consumers could face higher bank fees — even though the law requires the Federal Reserve to exempt institutions worth less than $10 billion.
Senate Majority Leader Harry Reid has allowed the bruising intraparty fight to persist. The Nevada Democrat said Tuesday that he supports Durbin but is not lobbying anyone either way on the proposal. Reid’s hands-off approach has allowed what is seen in part as a proxy fight between Durbin and the No. 3 Democrat, Conference Vice Chairman Charles Schumer (N.Y.), to flourish.
Durbin, however, praised Reid for supporting his legislation from the start. Durbin noted that he could have objected to bringing the amendment up for a vote, but he said many people want the issue settled and a vote is the best way to do that.
“It’s a good test for the Senate,” Durbin said on the Senate floor. “I don’t know how it’s going to turn out. I won last year, but they’ve poured it on ever since.”
Tester’s latest revision would delay the implementation of new regulations on debit card fees for 12 months, said Sen. Bob Corker (Tenn.), the lead Republican sponsor.
But it would also allow banks more flexibility to maintain higher debit card fees by allowing them to use other expenses — not just the nominal cost of processing the payment itself — to justify their rates.
Durbin tore into the latest proposal Tuesday as simply more sleight of hand on the part of the biggest banks to protect their profits and large bonuses for executives.
Tester’s amendment does not have an effective date, so regulation could be delayed far longer than 12 months, Durbin warned. And many expenses — including those bonuses — could be used to justify higher swipe fees, he said.
Those fees now average 44 cents per transaction — far higher than the cost of processing and the cost charged in other countries, Durbin said.
But an aide for a Senate Democrat backing Tester said the issue has been unfairly pitched as a battle between big banks and consumers.
“It’s very easy to demagogue this and say that big bad banks are charging too much and this is why your prices are high at Walmart,” the aide said. But cutting the interchange fee doesn’t necessarily mean consumers will pay less.
“They can talk about consumers all they want to, but this is about [the retailers’] bottom line,” the aide said. “Last time I checked, Walmart is not run by populists.”
Corker acknowledged that Senators in both parties are uncomfortable taking sides between their “friends” in banking and retail. However, he sought to convince Members to support the amendment as a “one vote solution” that would put the issue behind them.
But even if the amendment passes, it has a tricky road to reach the president’s desk before the new regulations take effect at the end of July. There’s no guarantee that the House will swallow the underlying bill or that President Barack Obama will sign it. And opponents warn it could open the door to relitigating the rest of the Dodd-Frank financial reform law, piece by piece.
The vote total, meanwhile, remains very much up in the air. Many Democrats and Republicans who voted for the Durbin amendment told Roll Call on Tuesday that they are still undecided. Several, including Sens. Sherrod Brown (D-Ohio) and Susan Collins (R-Maine), said they opposed an earlier Tester amendment that would have delayed the regulations for two years but are weighing whether to support the latest revision.
And Sens. Michael Bennet (D-Colo.), Kay Hagan (D-N.C.) and Mike Crapo (R-Idaho) — all of whom backed Durbin last year — have now co-sponsored the latest Tester bid.
The Durbin amendment passed last year on a 64-33 vote, and 56 of those supporters remain in the Senate. Tester and the banks will have to flip at least 16 votes to win.