Senate Rejects Proposal to Delay Durbin Amendment

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, June 8, 2011.

The Senate rejected by  54 to 45 votes a proposal that would have delayed for one year the scheduled July 21 imposition of new Federal Reserve Board rules capping interchange fees for issuers with assets over $10 billion at an initial rate of 12 cents per transaction. The delay would have permitted further study of the proposed rules and their impact on consumers and small banks.

The proposal, sponsored by Sen. Jon Tester, D-Mont., and Sen. Bob Corker, R-Tenn., had received support from Senate Banking Committee Chairman Tim Johnson, D-S.D. Johnson, who voted against the Durbin Amendment last year, noted that as regulators have recently testified, “finding a workable solution is not easily or quickly accomplished.”

Sen. Dick Durbin, D-Ill., sponsor of the original amendment to cap interchange fees, said passage of the Tester-Corker amendment would mean a “windfall of profit to big banks (that) they do not deserve.”

Speaking on the Senate floor a day prior to the vote, Tester said the Fed’s new interchange rules are “going to be bad for small banks and credit unions and ultimately for the whole country but especially rural America.”

Tester continued that “when every banking regulator who has a role in overseeing the debit interchange market tells you that Congress has created a system that will not work in the way that was intended, then we ought to listen.”

According to Tester, retailers are seeking laws at the state level to give themselves the right to deny purchases with debit cards that have a high interchange fee. “Given the amount of money the big box retailers are putting into their lobbying campaigns, it is only a matter of time before they are successful,” he said.

Corker, meanwhile noted that the Durbin amendment “is way too narrow and does not allow appropriate costs to be considered by the Fed when setting these rates.”

The American Bankers Association said it was “deeply disappointed” by the vote. “We will continue to push hard for relief from this ill-conceived law…it is within the Fed’s power to mitigate the disastrous consequences that are sure to come from this policy initiative,” the association added.

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