UPDATE: Senate Votes Down Swipe Fee Delay Bill
WASHINGTON, D.C. -- The U.S. Senate voted this afternoon 54 to 45 to pass the Tester-Corker amendment, which called for the delay of swipe fee reform for a minimum of six months for further study. However, the amendment needed to receive 60 votes for adoption. The failure to reach that number could be seen as a victory for the retail industry.
The measure was attached to the Economic Development Administration Reauthorization Bill yesterday afternoon in order to bring it to the Senate floor.
The tally came after about an hour of debate on the issue from both sides. Sen. Bob Corker (R-TN), who co-sponsored the amendment to delay swipe fee reform with Sen. Jon Tester (D-MT) told the Senate this afternoon that everyone knows there needs to be regulation, but the question is what is the fair way to regulate.
"What the Tester-Corker [bill] does is try to bring back into balance how we look at this transaction," Corker explained. He also said the proposed rule now is an attempt to punish banks for mistakes that have plagued the economy over the past few years. "We need to reinforce economic growth in this nation," he said. "This pushback is an attempt to punish, to stick a stick in the eye, of the financial industry." he said.
He continued that the Durbin Amendment, which calls for swipe fee reform for the debit card industry, should stand and regulation should be enacted, but that regulators should also be looking at fixed costs when setting rates.
"Our financial institutions are seeing in every way their ability to lend clamped down," Corker told the Senate. "If this amendment is defeated, it is just one more blow to our economy as we continue to constrain lending to communities and our citizens." He added that he hoped his colleagues would be able "to rise above the rhetoric that this is anything but another bank bailout."
Sen. Kay Hagan (D-N.C.) had joined with Tester and Corker in their efforts in asking the Senate for more time to study the issue several weeks ago. On the Senate floor this afternoon, she echoed Corker's comments that the amendment does not repeal the Durbin amendment. "This is a bipartisan, balanced, comprise amendment to address concerns," Hagan said.
Tester took the floor to further explain the amendment, insisting that even if the measure passes, the Federal Reserve still has to follow the letter of the law and the intent of Congress. The amendment directs the Fed to implement regulations at a date to their discretion, he said, in hopes to avoid the current situation where there is slightly more than one month until implementation. He added that the Fed cannot ignore implementing regulations or arbitrarily delay implementation for five years or so.
This amendment also directs the Federal Reserve to consider "all fixed and incremental costs in determining a reasonable and proportional rate," Tester explained, adding that the original law only limited consideration to those costs associated with the authorization of a debit transaction. He further stressed, in response to some concerns, that fixed costs do not include executive compensation, ATM machine maintenance or rewards programs. What should be considered, Tester added, are costs such as those associated with fraud prevention and monitoring.
However, Sen. Dick Durbin -- the legislator behind the original amendment calling for swipe fee reform that was approved last year -- tried to clear up misconceptions that the Durbin Amendment would hurt small banks and credit unions. "The law on the books today specifically exempts community banks and credit unions less than $10 billion," he said, adding that only 100 banks would be affected by the law. "We are trying to save mom-and-pop banks from credit card giants who created this mess."
Durbin also argued that delaying reform is akin to another bailout for big banks, specifically calling out the three biggest banks that received TARP money and will benefit the most from the Tester-Corker amendment: Chase, Bank of America and Wells Fargo. Calling the measure a "Baby TARP", he said it "is an outrage to consumers that they pay it every time they use their debit cards."
"You can’t vote at 2 p.m. for the pending amendment and say you are a friend of small business," Durbin added.
However, Tester argued this point, stating that it is not a given that the exemption for small banks and credit unions would work. "Every regulator I have talked to -- state or federal -- has said it will not work," he said, adding he does not believe in bailouts and did not vote for any bailout over the past few years. "The exemption for banks under $10 billion will not work and that's why I am here."