Big-box retailers have beat back banks’ latest attempt to kill a legislative provision that has cost lenders billions of dollars in lost revenue.
Known as the Durbin Amendment, the measure was included in the 2010 Dodd-Frank Act to limit how much money banks can charge retailers when consumers use their debit cards.
While House Republicans have proposed a bill to rip up most of Dodd-Frank, they’ve concluded that they don’t have the votes to pass the legislation as long as it includes a repeal of Durbin, said two congressional aides with direct knowledge of the matter. The decision to leave the debit-fee cap in place likely clears the way for a full House vote on the Dodd-Frank overhaul as soon as next month, said the aides.
The decision on Durbin is a victory for the retail industry, which has spent millions of dollars lobbying politicians. The issue has always been a sensitive one for lawmakers, many of whom are loath to pick sides in a fight between powerful corporations such as Wal-Mart Stores Inc. and JPMorgan Chase & Co. Members of Congress generally want cordial relations, and campaign contributions, from both industries.
Debit-card fees are set by Visa Inc. and Mastercard Inc., but most of the money goes to banks. The provision that mandated the fee cap, which is named after Democratic Illinois Senator Richard Durbin, has cost lenders an estimated $9 billion, according to analysts at Goldman Sachs Group Inc.
The bill to revamp Dodd-Frank’s post-financial crisis reforms was written by House Financial Services Committee Chairman Jeb Hensarling, and included the repeal of the fee cap. Hensarling’s panel approved the legislation earlier this month, but he has faced resistance from other GOP lawmakers over the Durbin amendment. Hensarling said on Wednesday he would remove the provision.
When House Republicans held an internal vote count this week, they found that scrapping Durbin would derail Hensarling’s Financial Choice Act, said the aides who asked not to be named because the vote was private.
House Republicans are eager to move the bill forward, as removing constraints that Dodd-Frank imposed on the finance industry is a top goal that is shared by President Donald Trump. Administration officials have repeatedly blamed Dodd-Frank for curtailing lending and economic growth.
“I’ve said before that repeal of the Durbin amendment was the most contentious part of the bill among Republicans,” Hensarling said in a statement. “We won’t let this one provision hinder passage of an important-priority bill that will end bank bailouts and help renew economic growth for all Americans.”
"We welcome today’s news that Congress is listening," said Cicely Simpson, executive vice president at the National Restaurant Association.
While other aspects of Dodd-Frank get more attention -- such as the Volcker Rule restriction on banks’ trading -- repealing Durbin has been one of the finance industry’s top priorities in Washington for years. The American Bankers Association, a lobbying group, pledged to keep fighting over the issue despite Wednesday’s setback.
“This is unfortunate, but certainly not the end of this debate," James Ballentine, an ABA executive vice president said in a memo sent to banks. The group will “continue to work with and educate members who are interested in removing this language.”
Jaret Seiberg, an analyst at Cowen Group Inc., predicted the battle between retailers and banks is far from over, which he said is good news for lawmakers.
“This is a great issue to fund-raise off of given how much it matters to banks, credit unions and merchants," Seiberg said in a note. Banks will continue to lobby for a removal of the cap and retailers may push for it to be expanded to include credit cards, he added.
Regardless of what happens in the House, Hensarling’s Financial Choice Act faces long odds in the Senate, where most bills need some Democratic support to pass. Senate Majority Leader Mitch McConnell said earlier this month that he’s not optimistic Congress will overhaul Dodd-Frank because of a lack of Democratic votes.
The bill is H.R. 10 115
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