Merchants win in Senate vote on debit-card fees

Associated Press

WASHINGTON

Merchants triumphed over bankers in a battle for billions Wednesday as the Senate voted to let the Federal Reserve curb the fees that stores pay financial institutions when a customer swipes a debit card. It was murkier, however, whether the nation’s consumers were winners or losers.

As a result of the roll call, the Fed will be allowed to issue final rules July 21 trimming the average 44 cents that banks charge for each debit-card transaction. That fee, typically 1 percent to 2 percent of each purchase, produces $16 billion in annual revenue for banks and credit- card companies, the Fed estimates.

The central bank has proposed capping the so-called interchange fee at 12 cents, though the final plan could change slightly.

Victorious merchants said the lowered fees should let them drop prices, banks said they could be forced to boost charges for things such as checking accounts to make up for lost earnings, and each side challenged the other’s claims. Consumer groups were not a united front, either: Though the consumer group U.S. PIRG said consumers would benefit, the Consumer Federation of America took no formal stance but said it was concerned about what both industries might do.

Travis B. Plunkett, the consumer federation’s legislative director, said the amount of savings that stores pass on to consumers would depend on how competitive their markets are. He said he also worried that the Fed’s current proposal might be too restrictive, which might tempt banks to “use that as an excuse to increase charges on customers they value the least: low- to moderate-income customers.”

In Wednesday’s vote, senators trying to thwart the Fed’s rules needed 60 votes to prevail but fell six votes short, 54-45. That delivered a victory for Sen. Richard Durbin, D-Ill., the Senate’s No. 2 Democrat, who muscled the provision into last year’s financial-overhaul law requiring the Fed’s action.