Retailers scored a major victory in their quest to limit the debit card swipe fees they pay banks to process debit card transactions. Yesterday the Senate voted down a bill that would have pushed back the July 21 effective date of the new swipe fee limit six months to a year for "further study." From Victoria McGrane and Maya Jackson Randall at the Wall Street Journal:
The Senate amendment to Dodd-Frank would have delayed rules that limit the amount banks can charge merchants for processing debit-card payments. The defeat of the provision, which had sparked a pitched lobbying battle involving the U.S.'s largest financial companies, retailers and consumer groups, was a major loss for banks and credit-card companies, which saw their stocks fall sharply after the vote, and could chill other campaigns to change provisions in the legislation.
The Wednesday vote strengthened the conviction held by many in Washington that changing Dodd-Frank will be next to impossible as long as Democrats control the Senate. House Republicans have teed up several bills that would roll back major provisions of the law, including several bills to weaken the independence of the new Consumer Financial Protection Bureau, but critics say they are most likely dead on arrival in the Senate.
This is a major defeat for the banks, which stand to lose about $12 billion in annual revenue, or about 5 percent of their total noninterest income, from swipe fees at a time they can ill afford to see another revenue stream squeezed, according to a report by American Banker.
As far as what it means for you, as I've said before, consumers don't really have a dog in this fight. If the retailers win out and swipe fees are limited, consumers may see marginally lower prices at retailers, at the cost of losing debit card rewards programs and free checking because banks can no longer justify them in the face of declining revenue from debit card users. The difference for consumers comes down to whether they end up paying more for checking or more for retail goods, and so it's pretty much a wash.
What do you think? Do you care about swipe fee reform?