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WASHINGTON, D.C. — The Financial CHOICE Act took a step forward in the U.S. House of Representatives, bringing a potential end to swipe-fee reforms closer to reality.
The House Financial Services Committee approved the legislation by a 30-26 vote on Tuesday. The legislation would replace Dodd-Frank Wall Street Reform and Consumer Protection Act, which the committee said provided "taxpayer-funded bailouts of large financial institutions; relieves banks that elect to be strongly capitalized from growth-strangling regulation that slows the economy and harms consumers; imposes tougher penalties on those who commit financial fraud; and demands greater accountability from Washington regulators."
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) sponsored the bill.
"The Financial CHOICE Act will help grow the economy for all Americans, not just those at the top. It promotes strong and transparent markets to revitalize job creation in our poorest communities and ensures every American has the opportunity to achieve financial independence, no matter where they start out in life," Hensarling said.
The Financial CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, received strong support from community banks and credit unions, small business groups and conservative organizations.
However, retailers groups have continue to voice their opposition to the bill.
"NACS is deeply disappointed at the House Financial Services Committee's vote to report the controversial and misnamed 'Financial Choice Act' — which includes repeal of the highly effective, pro-competition and pro-consumer debit swipe fee reform — but given the bipartisan opposition that arose even as the bill was rammed through committee, repeal efforts should not move forward," said Lyle Beckwith, senior vice president of government relations at NACS, the Association for Convenience & Fuel Retailing.
Beckwith added the bill would generate more costs and lost opportunity for entrepreneurs, higher prices for consumers and greater monopoly profits for the credit-card companies by eliminating competition in the debit-card arena.
"Along with members of Congress from both sides of the aisle who have already stood against this ill-considered measure, NACS will continue to fight to keep the interests of merchants and consumers ahead of the credit-card Goliaths, who already benefit from the highest swipe fees in the world," he added.
As the Retail Industry Leaders Association (RILA) explained, swipe-fee reform, also known as the Durbin Amendment, passed in the Senate in 2010 with 64 votes. The reforms require that the fees that banks and card networks charge every time a debit card is swiped are "reasonable and proportionate to the cost of processing the transaction."
Prior to the passage of reforms, card networks utilized their overwhelming market power to raise fees at will. Swipe fees are estimated to cost merchants and consumers $50 billion every year, RILA added.
"Today, by advancing the repeal of critical debit card fee reforms, the House Financial Services Committee put the interests of Wall Street ahead of those of Main Street. Members who voted for the CHOICE Act have voted to give the largest banks and card networks license to return to their past practice of fleecing merchants and consumers of billions of dollars every year," said Jennifer Safavian, RILA's executive vice president for government affairs.
"RILA will continue to fight this ill-conceived legislation and educate industry stakeholders on where lawmakers stand on this important issue," she added.