WASHINGTON – Restaurants, grocers and other businesses celebrated on Thursday as House Republicans backed off efforts to eliminate the cap on fees that banks can charge retailers when customers use a debit card.
The chairman of the Financial Services Committee, Rep. Jeb Hensarling, R-Texas, had pushed for scrapping the limit as part of his legislation to gut the Dodd-Frank law, the strict financial rules established after the 2008 financial crisis and the Great Recession. Big banks have lobbied strenuously against the cap, arguing that it hurts financial institutions while giving a break to retailers.
The issue, however, divided congressional Republicans and had forced the leadership to delay a vote on Hensarling’s bill. But late Wednesday, Hensarling said he would cut the debit-card cap provision from his bill, clearing the way for a House vote after lawmakers’ week-long Memorial Day break.
“I can perform simple math,” Hensarling said Thursday of his decision, a clear reference to lacking the votes.
When Congress responded to the 2008 financial crisis, it capped the debit card fee as a way to lower costs for businesses. The cap was established through what is often referred to as the Durbin amendment, named for Sen. Dick Durbin, D-Ill.
Trade groups hailed the outcome.
“Preservation of swipe fee reform is an important victory for retailers and consumers who would have faced higher fees from the country’s largest banks with every swipe of a debit card,” said Austen Jensen, a vice-president at the Retail Industry Leaders Association.
Rep. Dennis Ross, R-Fla., said the provision put members in a tough political spot where they would have to explain to banks and retailers in their congressional district why “they love one over the other, when in all likelihood it will be dead in the Senate and may even hold up Dodd-Frank reform.”
Ross said one local business told him that since the amendment had been put in place, the business was able to expand and hire more people.
“It’s helped consumers,” Ross said of the Durbin amendment. “It’s definitely served its purpose.”
Trade groups representing restaurants and grocery stores also voiced their approval for keeping the cap.
“This is truly a victory for Main Street merchants over Wall Street banks and should send a strong message that debit reforms are here to stay,” said the National Grocers Association.
Earlier this month, Hensarling’s panel approved Republican-written legislation that would gut much of the Dodd-Frank law enacted by Democrats and signed by President Barack Obama in the wake of the financial crisis. It passed on a party-line vote.
The bill would repeal about 40 provisions of the Dodd-Frank Act. Banks could qualify for much of the regulatory relief in the bill as long as they met a strict requirement for building capital to cover unexpected big losses. Republicans argued that big banks have done well under Dodd-Frank, but that community banks and credit unions are struggling to keep up with the regulatory burdens imposed by the law.
On Thursday, banks indicated that they will continue to push to scrap the cap.
Rob Nichols, president and CEO of the American Banking Association, said “the debate is not over.” He said large retailers have failed to pass along gains to their customers that were obtained through the lower fees.
“We will continue to let members know that a vote to keep the Durbin Amendment on the books is a vote for government price controls and against consumers,” Nichols said.
While the House is expected to pass Hensarling’s bill on Dodd-Frank, the Senate is expected to take a much different approach when it revisits changes to the Dodd-Frank law over the coming months.
Associated Press writer Andrew Taylor contributed to this report.