The Senate finally voted Wednesday on one of the pressing debates on the floor — cutting on debit card swipe charges.
Central to the debate is the proposed plan to allow the Federal Reserve to slice current charges that merchants need to pay banks every time consumers use their debit card. The Senate’s split decision with a difference of just six votes is a victory for merchants over banks. What’s at stake is the $16 billion annual revenue generated from swipe charges.
Merchants and stores lauded the result of the long-standing Senate hearing while banks and credit companies are still aghast with the decision. The Independent Community Bankers of America, an organized banking group, tagged this Senate rule as “extremely disappointing”.
Wall Street acknowledges that the fight for capping fees has ended, at least for now, but lobbyists from their decks swear to continue their crusade.
Democrat Sen. Richard Durbin of Illinois included this federal rule as provision of last year’s financial overhaul law which seeks to cap fees through the Federal government’s intervention. The new Federal Reserve regulation is set to take effect next month. This would dramatically reduce transaction fees from 44 cents down to 12 cents, said officials.
While retailers are celebrating the passage of this regulation, credit card companies and banks continue to mull over the disappointing senate vote turnout. This development in the US banking landscape will definitely affect the whole economic picture.
The Senate failed to reach 60 votes which were needed to halt the passage of this new banking regulation. Of the senators in attendance, 54 voted to block the regulation while 45 voted against.
Quite interesting is non-partisan division of the senate. In fact, two stalwart Democrat Senators, Sen. Durbin of Illinois and Sen. Jon Tester of Montana, fought over the passage of this provision, both, however claimed to protect the interest of small banks and consumers.
The Montanan senator proposed a delay on its passage on the grounds that the regulation still requires further studies especially on its effects on smaller credit unions and financial institutions. Sen. Tester proposed a trial at Montana where he seeks reelection next year. Smaller financial institutions fear that they will not survive the deemed effects of this regulation.
The proposal of Sen. Durbin to exempt companies with less than $10 billion assets prevailed over the delay of its implementation.