Swipe-fee sides pressuring lawmakers

Congressional Republicans are eager to overhaul the Dodd-Frank financial law. But one part, they say, they wouldn't mind putting off.

That's the provision that limits how much money debit card companies are allowed to collect from each consumer sale. Generally speaking, banks are against the limit and retailers are in favor. Persuading Congress to change the 2010 banking law is a long shot, but that's not stopping both industries from spending millions to remind lawmakers, sometimes multiple times a day, that a vote the other way will displease them.

Titans such as JPMorgan Chase & Co., which say they use revenue from so-called swipe fees to beef up cybersecurity and offer rewards programs, contend that the government shouldn't set prices. Behemoths like Wal-Mart Stores Inc., which say lower fees translate to lower prices, argue that the credit card industry operates like a monopoly and needs more regulation.

The yearslong lobbying fight has been reinvigorated by President Donald Trump's call to rip up financial rules. Stuck in the middle are lawmakers from both parties who prefer cordial relations, and campaign contributions, from both sides.

"This is like choosing between children," said Isaac Boltansky, a financial regulation analyst at Compass Point Research & Trading. "It's brutal for everyone involved."

Swipe fees, also known as interchange fees, are set by Visa Inc. and MasterCard Inc., but most of the money goes to banks. A provision of the Dodd-Frank law added by Sen. Richard Durbin, D-Ill., capped fees for debit cards at about 24 cents per transaction while leaving credit cards alone. Before the Durbin amendment, the average swipe fee for debits was about 44 cents. That means the measure has cost the banking industry $9 billion in revenue, according to analysts at Goldman Sachs Group Inc.

Dodd-Frank has long been a point of contention in Congress, especially regarding the Volcker Rule, restricting bank trading, and the creation of the Consumer Financial Protection Bureau.

Many Republicans and Democrats agree on one thing about swipe-fee limits: they're a pain in the neck.

"This issue always makes me grumpy," said Rep. Jim Himes, a Connecticut Democrat and former Goldman Sachs banker. "I'm being forced to choose between the competing interests of two big industries."

"We're listening to everyone," said Scott Tipton, R-Colo. "This is an ongoing issue."

"We haven't taken a position on this yet," said Rep. Claudia Tenney, R-N.Y.

The battle has been going on for years in court with retailers squaring off against Visa and MasterCard over interchange fees. The U.S. Supreme Court on Monday refused to allow a $5.7 billion settlement between the parties in a case that now promises years of additional litigation. On Capitol Hill, in the courts and in business negotiations, the stake from both debit and credit card fees is roughly $50 billion.

To ply an advantage in Washington, retailers have spent nearly $359 million on lobbying since 2010, according to OpenSecrets.org. During that time, banks and payment companies have spent about $248 million. Those totals include advocacy on other issues besides debit cards.

"This isn't just about a bill, it's about billable hours," said Charles Gabriel, a financial regulation expert at Capital Alpha Partners in Washington. "It's crunch time for all the lobbyists on both sides who've been fighting this for years."

Financial firms are relying on community bankers and credit union executives such as Randall Dixon, chief executive officer of Energy Capital in Houston, to make their case. Before one recent Washington visit, lobbyists coached them on what to say about debit cards.

"Lawmakers in Texas need to understand that there should be a level playing field," said Dixon, who was among hundreds of credit union executives introduced to members of Congress this month by the Credit Union National Association. "They need to hear from people like me."

Retail groups, including those whose members include Home Depot Inc. and Target Corp., have recruited hundreds of restaurant owners, convenience-store managers and other small-business owners around the country to make the opposite case.

"This is a top priority," said Doug Kantor, a partner at the law firm Steptoe & Johnson who works on behalf of groups including the National Association of Convenience Stores. "We're doing all of the things that you do when you want to lobby an issue hard."

Business on 03/28/2017

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