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WASHINGTON, D.C. -- It has not even been in effect for two weeks, but two House legislators are reaching across the aisle to propose a bill that would repeal the rule capping debit card transaction fees at 21 cents.
Representatives Jason Chaffetz (R-Utah) and Bill Owens (D-N.Y.) are expected to introduce the proposed legislation this afternoon. The two hope the repeal will restore balance to the electronic payment system. The cap, which was mandated by the Durbin Amendment, just took hold Oct. 1.
"This is a perfect example of the dangers of price controls and the inefficiency of government intervention in the free market," said Chaffetz in a statement. "The Durbin Amendment is an affront to consumers and the banking industry. These legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue."
The repeal legislation "fixes the disastrous consequences of this bill," Chaffetz added. "Congress must repeal this egregious provision that increases the costs of doing business on everyone."
The swipe fee issue has been swirling around the retail industry for several years but gained momentum when Sen. Dick Durbin called for reform in what is now known as the Durbin Amendment. In December 2010, the Federal Reserve released a proposal that would limit debit card transaction fees (also known as swipe fee or interchange fees) at 12 cents. The Fed's final ruling in June, which capped those fees 21 cents or roughly half of what banks and credit card companies were previously charging, was widely seen as a compromise between so-called big banks and the retail industry. However, neither side was thrilled with the end result.
The cap may cut as much as $8 billion in revenue from the largest U.S. banks, according to data compiled by Bloomberg Government. Much speculation swirled around what banks and credit card companies would do to recoup its losses from the decreased revenue associated with the transactions. Some banks, like Bank of America, are implementing a monthly surcharge for debit card users. And analysts expect Visa and MasterCard to up their fees on small-ticket purchases.
"The Durbin Amendment is harmful for community banks, credit unions and the communities they serve," Owens said. "While Congress clearly intended to exempt these smaller institutions from the cap on interchange fees, it's clear the Durbin Amendment will have unintended costly consequences for my constituents and their checking accounts."