House to Senate: You Go First

Rep. Spencer Bachus, chair of the House Financial Services Committee, made the most significant news this week on the "Delay Durbin" front. He told a group of international bankers that the House would wait for the Senate to act on legislation delaying the Federal Reserve's interchange proposed rule on debit cards. Chairman Bachus took this position despite his Committee having two hearings in the last month on this issue and hearing broad, bipartisan support for a delay and study approach.

So, what is happening on the Senate side? News reports this week suggest a bill introduction to delay Durbin is eminent. These reports also identified Sens. Jon Tester (D-MT), Tom Carper (D-DE) and Bob Corker (R-TN) as the lead sponsors. The good news here is all three Senators are members of the Banking Committee which would first consider any legislation affecting the Durbin Amendment from Dodd-Frank. Expect a bill to be dropped the week of March 14.

Two interesting organizations jumped into the Durbin discussion this week as well. The Officer of the Comptroller of the Currency (OCC) wrote the Federal Reserve to voice strong concerns with the proposed rule's inflexibility for companies to recover identifiable costs associated with running a debit card program. The National Association for the Advancement of Colored People (NAACP) wrote House Speaker John Boehner (R-OH) this week urging the House to move swiftly on legislation to delay the implementation of the Durbin Amendment because study has not taken place on the potential impact to the unbanked and "risker" consumers.

Please visit my blog next week as I hope to finally report on actual legislation and its contents.

House to Senate: You Go First

Financial Services Committee to Hear Testimony on Debit Card Fees Feb. 17

Rep. Spencer Bachus (R-AL), new chair of the House Financial Services Committee, has announced several upcoming hearings for February. He has scheduled a hearing on the Federal Reserve's proposed rule for debit card interchange on Thursday, February 17. At this writing, specific panelists have not been named, but many expect representatives from the Federal Reserve to appear in order to explain the proposed rule.

Rep. Shelley Caputo will chair hearing

The Federal Reserve issued its draft rules on December 16, 2010. The major headline was the proposed cap of 12 cents per transaction for debit card interchange. This cap represents a near 80 percent reduction in current debit card interchange rates. Comments to the proposed rule to Federal Reserve are due February 22. By law, the Federal Reserve must finalize the rule by April 22.

Small issuers universally decried the proposed cap even though the law exempts any financial institution lower than 10 billion in assets from the cap. These issuers are concerned merchants will steer consumers to debit cards with the lowest interchange rate.

After the December 16 release of the proposed rule, news reports began to appear detailing how large and small financial institutions plan to address this significant loss of interchange revenue. The Wall Street Journal ran an article on January 5 titled, "At Banks, New Fees Replacing Old Levies." Many other articles detailed how free checking accounts may soon go away for many consumers.

No doubt many in Congress are the hearing the chorus that having the government set debit card interchange may not benefit consumers in the end. The February 17 hearing in the House Financial Services Committee should be the first step in building that record.

Financial Services Committee to Hear Testimony on Debit Card Fees Feb. 17