WASHINGTON - Chase bank, one of the largest issuers of debit cards, has begun telling its customers that as a result of legislation sponsored by Sen. Dick Durbin (D-Ill.) the company will no longer be able to offer Disney Dream Reward Dollars.
Wall Street has been lobbying furiously the past few weeks to push legislation through the Senate that would delay what is known as “swipe fee reform," which requires the Fed to write rules that would reduce the fee merchants must pay for using debit cards to a “reasonable” amount.
Chase's claim comes amid a dramatic behind-the-scenes fight in the Senate that pits Democrats against Democrats, Republicans against Republicans and Wal-Mart against Wall Street.
“I’ve tackled the big boys, but there’s nothing like Wall Street banks to show you muscle power,” Durbin told HuffPost.
On the Senate floor Thursday, the number two Senate Democrat accused Chase of trying to pressure the Senate with its letters to consumers. “Now the banks and credit card companies are pulling out all the stops. I learned yesterday that Chase, which is one of the major issuers of these debit cards across America, sent a letter to their customers in a number of states and said, you know, if you don't repeal the Durbin amendment, we're going to end up in a position where we won't be able to give you all of the rewards which we're offering you on your debit and credit card,” Durbin said.
A spokesman for Durbin didn’t have a copy of the letter he referenced. Chase did furnish HuffPost with a sample of the letter it had sent to customers, but declined to respond to Durbin's charge.
“Congress recently enacted a new law known as the Durbin Amendment that significantly impacts debit cards,” reads the sample letter, with the underlining in the original. “As a result of this law, we will be changing our debit rewards program. After July 12, 2011 you will no longer earn Disney Dream Reward DollarsSM when you use your Disney Rewards Debit Card.”
Consumers will also miss out on a ten percent discount, the letter warns. “After October 31, 2011, your Disney debit card will no longer be eligible for the Cardmember Perks of the Disney Rewards Program, such as the Disney Theme Park Perks and 10% off select Disney merchandise purchases of $50 or more,” reads the missive.
The law does not require debit card companies to cut back on their Disney bucks, but banks reasoned during the debate that the reduced revenue the measure would cost them would mean they could be less generous with rewards.
Further down in the letter, though, Chase lets its customers in on some good news--the card will no longer come with an annual fee. A spokeswoman for Chase said that the fee is being waived because such costs only apply to rewards cards: No rewards, no fee.
The letter also informs customers that they can still earn Disney dollars by using their credit card.
Sen. Jon Tester (D-Mont.) is pushing an amendment that would delay implementation of swipe fee reform by two years while regulators study how it might affect small banks, which were exempted from the law.
Tester had hoped for a vote on his amendment Thursday, but it became increasingly clear throughout the week that he lacked enough support. Tester told CNBC’s audience Thursday morning that he had at least 60 votes, but did not pull up his amendment throughout the day, a strong indication he knew otherwise.
Durbin, whose job it is to count votes for the Democratic caucus, wouldn’t say how many nays he had against Tester’s amendment, but, he said, “I will tell you that I’m working it.”
Durbin said that consumers should ignore Chase's threat. "Don't expect any favors from this industry. If we do not regulate the credit card industry and the banks that issue these cards, trust me, the consumers will continue to lose time and time again," he said on the Senate floor.
"And as for Chase, I don't think they're going to be any -- there aren't going to be any poppy flowers sold on their behalf on any street corners," he continued. "If I recall correctly, they had a 48 percent increase in profits over the last year. They're doing quite well. Now it is time to give small businesses and consumers across America a break."