Retailers Win, Banks Lose in Debit-Card Swipe Fee Fight

By Rob Tricchinelli

An effort to repeal the caps that banks can charge on debit-card transactions died in the House after it triggered an intra-party fight that threatened to derail the smooth passage of a wide-ranging Republican financial overhaul bill.

House Financial Services Chairman Jeb Hensarling (R-Texas) initially sought to repeal the so-called Durbin amendment as part of his Financial Choice Act (H.R. 10), which is heading to the House floor the week of June 5.

That triggered a fevered lobbying blitz by retailers, which want to keep the caps in place, and banks, which don’t.

With the repeal effort stripped out of the House bill in substitute legislation offered by Hensarling, here’s a look at winners and losers.

Winner: Retailers

Retailers argue that the caps save stores money, which they can then pass on to consumers. A Fed rule implementing the Durbin amendment limits debit-card fees at 21 cents plus 5 basis points of a transaction’s value. Before the rule, the fees averaged 44 cents per transaction.

The National Retail Federation, for instance, claims that merchants and consumers have saved more than $40 billion in fees since the caps took effect.

Small retailers like independent grocers say they feel squeezed by debit-card fees even with the caps in place, which stifles their growth and ability to compete.

Furthermore, retail groups say the caps force payment networks to compete on other grounds than just price, which has improved security of payment information.

Loser: Banks

Banks and their trade groups don’t buy the retailers’ argument that the savings are passed on to consumers, instead claiming the biggest retailers like Wal-Mart and Target pocket most of the difference.

They further argue that the lost revenue forces individual banks to cut back on services, which disproportionately affects lower-dollar customers. A Bloomberg Government analysis around when the rule took effect predicted that it would cost Bank of America Corp. more than $1 billion and JPMorgan Chase & Co. more than $950 million.

Banks with less than $10 billion in assets are exempt from the caps, but community banking groups still urged its repeal.

“Federal Reserve data show that Durbin price controls have eroded community bank interchange revenues,” Independent Community Bankers of America President and CEO Camden R. Fine wrote earlier this year.

The banking groups have vowed to fight on, but the battle appears over for now.

Winner: Restaurants

Restaurant groups joined retailers in favor of the status quo.

“Small businesses will not be stuck with a debit card tax on top of their already thin operating margins,” Cicely Simpson, executive vice president of the National Restaurant Association, said in response to the repeal effort.

Simpson’s group specifically ran digital and print advertisements in the districts of House Republicans viewed as moderate or vulnerable in 2018, including Reps. Charlie Dent (Pa.), Elise Stefanik (N.Y.), Don Bacon (Neb.), Carlos Curbelo (Fla.), and Steve Knight (Calif.). The effort seems to have paid off.

Loser: Free-Market Conservatives

Aside from the impact the caps have on prices and consumer costs, free-market conservatives consider them intrusive price controls.

Some of Hensarling’s top lieutenants on the committee, like Reps. Blaine Luetkemeyer (R-Mo.) and Bill Huizenga (R-Mich.), told Bloomberg BNA they supported the repeal primarily for that reason.

“The federal government should never be in the business of price-setting, a function better performed by the market,” a coalition including Americans for Tax Reform and the R Street Institute wrote in a February letter to lawmakers.

In a statement after the repeal language was removed, the Competitive Enterprise Institute’s Iain Murray called the move a “capitulation.”

“It is doubly outrageous that the House GOP has decided price controls are acceptable in what is supposed to be a free economy,” he said.

Winner: Jeb Hensarling

Even though he and other committee Republicans view the caps as a loathsome federally mandated price control, his substitute legislation largely quells the intra-party squabble.

Leaving the caps in place also avoids the risk of holding an on-the-record vote, during which party members would have to publicly support one set of trade groups over another.

In a late-April interview with reporters, Hensarling said the repeal effort “is probably the single most contentious portion of the bill” among Republicans.

Even though the repeal is struck, hundreds of pages of deregulatory priorities remain. Hensarling’s bill is ambitious but should have an easy time passing the House.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Seth Stern at

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