Bankers dueling with retailers over a Federal Reserve plan to limit debit card processing fees took the fight into friendly territory today at a House Financial Services subcommittee hearing.
The American Bankers Association and other industry groups have launched an aggressive lobbying blitz to stop, delay, or overturn the Fed proposal that would cap the so-called interchange fees at 12 cents per transaction. The average fee is now around 44 cents per transaction and generates $16 billion in annual bank revenue, according to the Fed.
Republicans and Democrats alike on the subcommittee urged Fed Governor Sarah Bloom Raskin to delay finalizing the proposed limit on fees, which Bank of America Corp. alone says will cost it $1 billion in lost revenue.
“Has the Federal Reserve considered the potentially anti-competitive environment that this rule might lead to?” said Rep. David Scott, a Georgia Democrat. “The banks are not going to pay for this, the merchants are not going to pay for this… it’s going to be the American consumers who pay for this.”
The ABA’s political action committee ranks as one of Scott’s five biggest political contributors in 2002-10 with $44,000. Other big donors include the Credit Union National Association PAC, which gave $42,748, and the Bank of America Corp. PAC, which contributed $42,500.
The ABA and Bank of America PACs also are among the five biggest career contributors to Texas Rep. Jeb Hensarling, the No. 2 Republican on the full committee.
The Fed has met with more than two dozen banks and banking groups to discuss the debit transaction fee, including repeat sessions with Bank of America, Visa, and MasterCard.
Rep. Peter Welch, a Vermont Democrat, spoke on behalf of retailers, who support the Fed’s plan to limit interchange fees. U.S. banks now charge debit transaction fees that are “the highest in the world” and hurt small family-owned stores as well as giants like Wal-Mart, Welch said. Welch’s largest political contributors are mostly labor unions.
7-Eleven Inc. Vice President David Seltzer told lawmakers his company now pays $177 million annually in interchange fees. It and other big retailers have been unable to negotiate reductions with Visa and MasterCard because the two companies regard banks as their chief customer, Seltzer said.
The ABA, Consumer Bankers Association, Independent Community Bankers of America, other banking groups, and individual banks spent a combined $56 million on lobbying in 2010, according to the Center for Responsive Politics. The Retail Industry Leaders Association, National Retail Federation, other retailing groups, and individual stores together spent