Senate Vote Looms On Swipe Fee Plan

The Wall Street Journal reports:

The U.S. Senate could vote as early as Wednesday on a revamped plan to delay cuts in the debit card processing fees financial firms charge merchants, a highly anticipated moment in the raging fight between retailers and bankers.

In a sign that the new plan is gaining momentum, Senate Banking Committee Chairman Tim Johnson (D., S.D.) signaled late Tuesday he would support the new proposal to delay the debit-card interchange fee rules. "This modest, bipartisan proposal does not repeal the debit interchange amendment, but simply asks the regulators to take just a little more time to study and get it right," Johnson said in a statement.

In a last-ditch bid to pick up votes, Sens. Jon Tester (D., Mont.) and Bob Corker (R., Tenn.) on Tuesday offered a compromise to delay the "swipe fee" provisions Congress included in last year's sweeping Dodd-Frank financial overhaul.

The new proposal is weaker than financial firms had hoped, calling for a delay of up to 12 months instead of the two-year delay Tester originally proposed.

But already, senators who voted for the swipe-fee curbs last year are changing course. Sens. Kay Hagan (D., N.C.) and Mike Crapo (R., Idaho), who last year voted for Sen. Richard Durbin's (D., Ill) amendment to curb swipe fees--also known as interchange fees--joined Tester and Corker in introducing the compromise. In addition, the American Bankers Association and National Association of Federal Credit Unions came out in strong support of the modified amendment.

Financial firms, ranging from banking giants like Bank of America Corp. (BAC) to small credit unions, could take a significant financial hit if the debit-card regulations go into effect on July 21, as required by the Dodd-Frank Act.

Meanwhile, the regulations would be a huge win for retailers, from Wal-Mart Stores Inc. (WMT) to small mom-and-pop shops, that have long fought to rein in the swipe fees they pay banks every time a consumer uses a card at the register.

Tester's modified legislative proposal would still allow the Fed to limit debit-card processing fees, but it would direct the Fed to factor in additional costs, which could lead to a less severe cap.

Under the new plan, federal regulators would need to take six months to study whether the rules would hurt consumers and whether an exemption for small financial firms could be effective. Small firms argue that market forces would require them to charge lower swipe fees even though the law calls for them to be exempted.

Under the compromise plan, if agencies find that consumers may be adversely affected, or that the exemption for small firms isn't effective, or that the rules don't consider all of financial firms' costs, the rule would need to be withdrawn.

"It's been crafted in a way to bring people together," said Corker. "We've made actually three revisions to an amendment that I hope we're going to be voting on over the course of the next 48 hours, maybe 72 hours."

Corker pointed out that the new proposal would still leave debit cards as a regulated entity.

"It's not the solution I would ultimately like to see," said Corker. "But I think that's a solution we may be able to come to in this body."

The plan to delay the fee limits is so controversial that it will need to garner 60 votes in order to pass the Senate, a high threshold given that more than 60 senators last year agreed that fee caps were necessary. Banks are hoping a significant number of lawmakers have buyer's remorse amid growing concerns about the impact the regulations could have on small financial firms.

"It sort of pits senators between retailers and bankers, and I understand that people just don't really like being in that position," Corker said. "It's going to be really close. I don't want to make any predictions."