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WASHINGTON, D.C. — U.S. Sen. Dick Durbin (D-Ill.) and Rep. Peter Welch (D-Vt.) were original backers of the retail industry's push for debit swipe-fee reform. Seven years later, with those reforms threatened, the federal legislators are confirming their support.
In an op-en piece in The Hill, Durbin and Welch explained that the 2010 reform said swipe fees — also known as interchange fees — must be reasonable and proportional to the cost of conducting a debit card transaction. In turn, the Federal Reserve Board capped that fee at 22 cents for big banks.
The law allows the other banks and credit unions to continue allowing Visa Inc. and MasterCard Inc. to set swipe fees without regulatory limits. If a big bank doesn't want to be subject to fee regulation, the bank can set its own fee rates rather than using Visa's or MasterCard's rates, they wrote.
"If the swipe fee reform law is repealed, Visa and MasterCard will once again be allowed to fix fee rates like they used to," the legislators said, adding big bank fee rates will double, giving them an estimated $8 billion per year, "the equivalent of a multibillion-dollar tax increase on retail purchases."
Debit card swipe fee regulations stem from the Durbin Amendment — part of the larger Dodd-Frank Wall Street Reform Act. The reform took effect Oct. 1, 2011.
Durbin and Welch are speaking out as U.S. Rep. Jeb Hensarling (R-Texas) readies his proposed Financial CHOICE Act, the Republican plan to replace the Dodd-Frank Wall Street Reform Act and promote economic growth. CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, as CSNews Online previously reported.
"Main Street America deserves an electronic payments system with competition, transparency and reasonable fees. The 2010 swipe fee reform law helps provide that. Repealing the Durbin Amendment will double big bank debit fees, decrease competition, punish small businesses and raise consumer prices," the legislators wrote.
"Rarely has the choice between big banks and Main Street been so clear. Congress, don't vote to double debit card fees," they added.