Clash of the Titans: Banks vs. Retailers on Swipe Fees

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The biggest fight in Washington that’s probably not on your radar is the slugfest over interchange fee regulation between banks — the pure profit they gain every time you swipe your debit card is an industry golden goose that basically funds all those rewards points, free checking accounts, etc. — and retailers, who primarily bear the costs. Sen. Dick Durbin championed swipe fee reform during the Dodd-Frank debate and the Fed originally proposed a strict cap of 7 to 12 cents per transaction (for comparison, Visa currently charges 15 cents plus 1.55% of a purchase at major merchants). But the final rule isn’t set yet and the law goes into effect in July. There’s now legislation in the Senate to delay the issue. Cue the intense lobbying scrum:

Democrat Joe Manchin (D-W.Va.) could wind up being the deciding vote on the swipe fee bill. On the morning of April 14, Manchin booked a big room in the Senate Hart Office Building more often used for hearings than for lobbying — a symbol of how thoroughly business fights have come to dominate the agenda, that they now must be waged in hearing rooms with the doors closed. Manchin was undecided as the meeting broke up.

On April 18, while Congress was in recess, credit unions flooded Hill staffers with scripted phone calls from customers worrying that the Durbin amendment will kill their rewards points. The bank lobby named April 21, the deadline the Fed missed, “Save My Debit Card Day” and launched a Twitter campaign using the hashtag #savemydebitcard. The mid-March ABA convention in Washington prompted the type of personal glad-handing that lands cosponsors for bills. It was one of at least three major bank fly-ins since February.

The merchants have been everywhere, too. Five-hundred restaurant owners flew in last week; 7-Eleven owners, a Hill staple during the initial fight, came the week before that. Grocers and beer wholesalers have also visited.

Part of what’s interesting about the battle is that it doesn’t really break along partisan lines. Retailer vs. bank allegiances pit Durbin against the likes of Chuck Schumer and Jon Tester. Anyway, the HuffPost’s really long article today is a great case study in the culture of Washington interests and well worth the time.

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