“This week, one year after the defeat of the Tester Amendment, the facts are in and the outcome is clear; despite a flawed Federal Reserve rule, the reforms are working,” The Merchants Payments Coalition said in a statement, according to Credit Union Times.
Retail groups pushed for the Durbin Amendment, a provision of the 2010 Dodd-Frank Act that caps the interchange or “swipe” fee — the amount a bank can charge a merchant to process a debit card transaction.
In response, the banking industry began its own lobbying, and Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) sponsored the Tester Amendment, which fell six votes short of passage in the U.S. Senate. The Federal Reserve, nonetheless, opted to establish fee caps that were twice the original rate proposed by consumer groups and half the size of the previous rate, The Hill reports.
Though the MPC claims that the rule is having the desired effect, President Richard Hunt of the Consumer Bankers Association disagrees.
“Unmitigated disaster,” Hunt said, according to The Hill. “It’s actually worse than we thought.”
Hunt said that the new fee limits have caused a drop-off in revenue, ultimately forcing many banks to charge new fees or change the rewards that they can offer to consumers.
“Unfortunately, we’ve had to pass the cost on to consumers, as we said we would,” Hunt said, The Hill reports. “The only reason retailers did it was to line their own pockets. Period.”
While the retail industry hopes to extend the Durbin provisions into credit card regulations, as well, Hunt said that is an unlikely scenario.
“There’s more of a likelihood that debit interchange will be repealed than credit interchange will be passed,” Hunt said, according to The Hill. “We secured 54 votes last time. We’re much closer to 60 than they are.”