A measure moving through the US Senate aims to help consumers by demanding that the fees for a debit card transaction be "reasonable" and proportional to banks' processing costs.
It won't be an outright price cap, but the provision could affect millions of Americans every time they swipe their plastic cards to pay for gasoline or groceries.
One sign that the provision may succeed in lowering fees: Shares of financial firms fell Friday morning, a sign that investors expect bank profits to be squeezed if the measure becomes law. The immediate beneficiary of lower debit fees would be the retailers who pay them. But they might then pass some of the savings along to consumers.
Support for the measure came from both parties, with 17 Republicans joining 47 Democrats to add the card-fee measure as an amendment to a larger bill on financial regulatory reform. That bill would have to be passed and reconciled with its House counterpart before President Obama could sign it.
Although not all banking-industry analysts see it as a big win for consumers – or a big blow to bank profits – the measure could be one of the elements in financial reform that has the most direct impact on ordinary Americans.
• It would direct the Federal Reserve to issue rules to ensure that debit interchange fees are reasonable and proportional to the processing costs incurred by the card companies. Visa and MasterCard currently charge 1 to 2 percent of the transaction amount – "far higher than the actual cost of processing," Senator Durbin says. The Fed would not set a fee level but would have new oversight authority on the market.
• It would allow retailers to offer discounts for customers to pay by cash, check, or debit card. The amendment also allows merchants to set minimum-purchase amounts for use of cards.
• It would maintain a requirement that Visa and MasterCard demand merchants to accept all cards within their networks, including those of small banks or credit unions.
Industry analysts warn that, even if the provision ends up saving consumers some money, the impact could be complicated. Banks could raise other fees to offset the income they currently reap on debit transactions, for example.
Also, consumers could be inconvenienced if growing numbers of merchants add minimum-purchase rules that force people to use cash.
In morning trading Friday, an index fund representing regional banks was down more than 2.5 percent, while giant Bank of America fell just as badly.
Durbin argued that his amendment was needed because Visa and MasterCard control roughly 80 percent of the debit market, allowing them to set high interchange fee rates that apply to all banks within their networks. The Senate voted 64 to 33 in support of it.
This measure, focused on debit cards, would follow a high-profile law on credit cards: the Credit Card Accountability, Responsibility and Disclosure Act, which was passed in 2009. Key elements of it went into effect in February.
As with the Durbin amendment, critics warned that card companies would raise new fees to offset provisions in that law. But so far, "very few issuers have implemented inactivity or annual fees, two fees people feared would result from the restrictions of the Credit CARD Act," according to a study by Bankrate.com.