Fed May Hold Fate on “Delay Durbin” Bills

Congress is back in business (session, i.e.) next week, but the committee schedules are a bit slow getting published. At this writing, the House Financial Services Subcommittee on Oversight and Investigations will conduct a hearing on March 30 to explore the budget implications of Dodd-Frank. I would expect the interchange issue to be raised in some capacity.

The Senate Banking Committee has scheduled a hearing on March 29 relating to housing, but another hearing for next week could be announced today or Monday.

Sen. Jon Tester’s legislation to delay the Durbin Amendment (S. 575) picked up two co-sponsors recently. Sen. Max Baucus (D-MT), chair of the Finance Committee, and Sen. Daniel Akaka (D-HI), member of the Banking Committee, added their names in support of S. 575. More than 10 House members agreed this week to co-sponsor Rep. Shelley Moore Capito’s (R-WV) “delay Durbin” bill (H.R. 1081). Total House co-sponsors currently stand at 42.

The Federal Reserve may be unintended decider on the legislative momentum for the Tester and Capito bills. The Fed’s final rule on implementing the Durbin Amendment is due April 22. If the final rule fails to address concerns with the small issuer exemption and resolve how fraud prevention may impact interchange rates, we should expect Tester/Capito proponents to swing into action.

Fed Chairman Ben Bernanke said this week he wants to address legitimate concerns with the small issuer exemption in the final rule. Since the Fed defended its proposed rule in February by telling Congress that it was merely following language in Dodd-Frank (Section 1075), it would appear inconsistent that the Fed get “creative” in the final rule. We will find out in about a month.

Meantime, Tester/Capito proponents may be in a “wait and see” approach until the final rule gets published.

Fed May Hold Fate on “Delay Durbin” Bills