Rep. Barney Frank Pledges To Revise Dodd-Frank's 'Swipe Fee' Provision

The banking industry breathed a sigh of relief when the implementation of a key provision of the Dodd-Frank financial reform package was delayed.

On Tuesday, Rep. Barney Frank announced plans to revise the "swipe fee" amendment of the Dodd-Frank financial reform law because of statements by the Federal Reserve saying it is delaying the bill's implementation. When the measure was introduced last May, it was considered by analysts to be a rare loss for big banks and card payment networks like Visa and Mastercard.

The Durbin Amendment, introduced by Sen. Richard Durbin (D- Ill.), would reduce controversial "interchange fees" that credit card companies charge retail stores for each individual customer transaction.

Since retail stores that accept credit cards must pay swipe fees by law, banks can charge high swipe fees without consequence, making it a lucrative revenue source for credit card companies and, as HuffPost's Ryan Grim reported last year, a source of frustration for merchants.

"The Federal Reserve's announcement that they cannot meet the deadline on interchange fees confirms my view that this is the only part of the financial reform bill that needs to be amended," Frank said in a statement. "For this reason, I support legislative action to postpone the deadline so that we can revisit it."

In recent months, JPMorgan Chase has led the push for legislators to kill the Durbin Amendment, arguing that regulating swipe fees would drastically cut into revenue and eliminate their ability to continue widely-popular reward programs. Chase bank, for example, has begun telling customers that as a result of Durbin's legislation, the company will no longer be able to offer Disney Dream Reward Dollars.

"We don't want to make the changes," JPMorgan Chase CEO of consumer finance Ryan McInerney said in an article by American Banker. "But we have to make the changes as a result of the economic impact of the law. If the regulations are delayed, we wouldn't make the changes."

Jamie Dimon, the bank's chairman and CEO, also criticized the amendment, saying it "was passed in the middle of the night with no facts, no analysis and Congress had to vote on it, and it had nothing to do with the crisis."

Last week, the Federal Reserve, responsible for implementing the Dodd-Frank financial reform law, announced it could not comply with the April 21 deadline to finalize regulations. How lawmakers will alter the Durbin Amendment remains undecided.

Correction: A previous version of this article incorrectly stated that retail stores are legally required to accept credit cards.

Comments

[AllAmericanAmericanBoy]

02:49 PM on 04/28/2011

If the Fed can't comply with the law on time, fine them. They just print the cash anyway.

[AllAmericanAmericanBoy]

02:48 PM on 04/28/2011

Retailers could seriously dent bank card fees by offering a 5% discount for cash. Remember cash?

[Mister Grumpy]

01:40 AM on 04/09/2011

If banks can't profit from the exchange fee......... you can rest assured that they will find another way to fleece you.........

[RobertDayMRC]

06:27 PM on 04/08/2011

The banks are just playing on fear. Do the math. If a merchant has to give 2-3% of their profits to banks/processors, then it just gets factored back in to the cost of their sale price. I think we all understand and can agree on this. Now, the question is, do you get a 2-3% rebate on ALL purchases? The key word is ALL! No, not even close. The banks drive the cost of goods up and give back very little. So today we all pay at least 2 to 3 % more for everything! I for one will gladly give up the few rewards dollars I earn so that the cost of goods and services can be lowered across the board.
Will the business pass this savings back to the consumer? Yes, in many ways! When a business has less overhead, it ups the odds they will stay in business. When they have great profits they they hire, they expand, they put people back to work!
Do you want to support the banks and their CEOs who take home 10-20+ million dollar bonuses and employ a very small segment of America’s workforce?
OR, support the businesses that will use the money to grow their business and put Americans back to work?
The company you support and is able to keep its doors open might just be the one you work for!

Robert Day
Managing Partner
www.MerchantReliefCouncil.org

[free markets rule]

10:03 AM on 04/08/2011

Even Mr Franks understands that this was bad legislation. Congress setting price controls is always bad business. What comes next?
I have always enjoyed the rewards programs and free checking my bank provides. When those are gone, what are the merchants going to do for me with the profits windfall they receive?

And to "nypapajoe" do you think the the poor becoming unbanked because free checking disappears is a good thing? What side are you on?

[AllAmericanAmericanBoy]

02:53 PM on 04/28/2011

"Rewards", a fancy name for "we skim 20 dollars out of your transactions and pretend that we'll share a dollar of it with you, if you qualify, maybe".

[nypapajoe]

11:04 AM on 04/07/2011

Truth be told the CEOs fuel bill on their Yachts and Jets is getting rather expensive and they can't have that! So pass it on to the consumers! As Mel Brooks once said in his movie spoof "F...k the Poor"! The only problem is that the banks really mean it!

[KitchenCabinet]

10:30 AM on 04/07/2011

It is well past time for banks to return to serving the people instead of bleeding the people for every last nickel. The only raisin d'être for a bank should be to hold our excess cash in trust, lending it to secure investment in our communities to encourage growth. Instead the big banks have become leeches. Time we stopped giving up our blood so easily and for free.

[Boston 1L]

10:25 AM on 04/07/2011

Personally, I like the interchange fees. Their the reason Chase gives me cash back. I have my card for 2.5 years now, have never paid interest or any other fee and have gotten to build up quite a bit of cash back earnings.

Yes, I realize that the cost of my cash back is spread out amongst the consumer populace. Nevertheless, the cash back lets me profit.

Thankfully, with Frank on board, this measure will get delayed and eventually removed.

[Boston 1L]

10:27 AM on 04/07/2011

Thier = They're

[AllAmericanAmericanBoy]

02:56 PM on 04/28/2011

Your cash back is not spread among the populace, it comes out of your pocket, where do you think their cash back comes from?

[Whitemellon]

08:50 AM on 04/07/2011

I do believe the lobbyist sweetened the pie for Mr Frank. I can't believe they even threw the Disney rewards crap out there as evidence of the need to review this. The merchants are having a tough time out there. The banks are cleaning house. Now let me see, who can contribute more come election time...auh, the banks.

[free markets rule]

10:07 AM on 04/08/2011

If you owned a bank, would you provide a service at less than your total cost AND continue to provide rewards for using the service that loses money? Only the govt can do that.

Is that the "Disney rewards crap" you refer to?

[me again]

08:25 AM on 04/07/2011

Dimon is completely wrong and obtuse in his arguement. Retailers should not foot the bill for affinity card rewards programs. The banks use these programs to lure customers, the onus should be on them and not the retailer to pay for the perks of these programs. The banks for years have taken zero responsibility for paying for these programs. Frankly, as a merchant, I prefer to take non-affinity cards and American Express, because at least I know what the numbers will be up front. Banks can no longer have a free ride on their own schemes.

[Ed Baker]

07:59 AM on 04/07/2011

Will HP hire JUST ONE competent financial JOURNALIST? Does anyone CHECK FACTS?

See this statement by the writer:"Since retail stores must accept all credit cards by law, banks can charge high swipe fees without consequence, making it a lucrative revenue source for credit card companies and, as HuffPost's Ryan Grim reported last year, a source of frustration for merchants."

Retail stores are not required by law to accept ANY form of payment. A merchant can refuse to transact with credit cards - he can refuse to take checks - he can even refuse CASH if he wants.

This is an error - this writer obviously just makes things up out of thin air.

Shame on HP for publishing this. Get an editor, check some facts.....

[AZreb]

10:47 AM on 04/07/2011

Right - have tried to use my Discover card and was told "We only accept Visa and American Express" - or order something online and see that only certain cards are accepted.

[Ed Baker]

11:35 AM on 04/07/2011

In our business we do not accept cash - ever. We'll take a check or a credit card - but never cash. The writer just made that up, and it's shameful that HP didn't do an elementary fact check on this - even an editor of a high school newspaper does that.

[Kassandra]

07:17 AM on 04/07/2011

Myself, I rather have no fees than their "rewards" ( what? a fanny pack made of little pieces of leather sewn together?)
Meanwhile, back at the bank ( helping out in the War on Drugs):

"More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement."
http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

See, it doesn't matter HOW you make your $$$$$$$$$$$$$$$ in the US as long as you.... MAKE IT

[AZreb]

10:48 AM on 04/07/2011

And as long as you DONATE IT to the politicians' campaigns!!!!

[loki]

02:42 AM on 04/07/2011

so to save the banks a major advertising gimmick , reward points, the merchants will be charged whatever the banks demand, so they can bribe customers into signing up with their cards, and using the cards more. The merchant is expected to pay for the card holders Disney trips and air miles, while the card companies do nothing but get huge profits? What a scam.

[james rimes]

02:51 AM on 04/07/2011

Card Holder Services...
http://www.youtube.com/watch?v=NCJHi-b0rhw

[james rimes]

02:33 AM on 04/07/2011

A few thing Barney Frank Would Like Forgotten....

http://www.c-spanvideo.org/program/8200-1

http://politicalvelcraft.org/2011/04/07/barney-frank-caught-in-web-of-lies-barney-protects-goldman-sachs-wells-fargo-by-not-releasing-mccaincantwell-aka-glass-steagall-act/

[james rimes]

02:34 AM on 04/07/2011

things....rrrrrrr

[LouGots]

01:50 AM on 04/07/2011

Interesting article. We all should be watching things like this closely. Our goal should be to game the system for our advantage, not the bank's.

Personally, I use a credit card for everything I possibly can, and pay the balance in full, every month. No-load card from the credit union, 0.00% annual interest rate, because I pay in full all the time and, when possible, I time big purchases and bill payments to maximize the float.

Figure about a five-to six week float, if you time it right. Say your credit card bill period starts April First. You buy something big on April Second, you get the credit card bill on May First, and it's not due until May 15. You pay with web bill pay on the due date--Ka-ching!

It's not a big deal at today's low interest rates. but I'm fleecing them, not the other way around, so there is a certain element of satisfaction involved..

[builderman55]

02:26 AM on 04/07/2011

But, they are going to start defeating this by charging an annual fee for those who do exactly what you do.

[LouGots]

09:08 PM on 04/07/2011

You would think so, but the competition for credit card trade is brutal. I have three no-load cards, two of which are from institutions with whom I do other business. I don't expect them to go that route, as they are still getting along on the cut they get from vendors and the interest they charge those who carry balances.

Think about that competition. You can't go into a bank without people hawking credit cards on you like bees. I probably get 4 or 5 credit card "offers" in the mail a week.

[Kassandra]

07:19 AM on 04/07/2011

They call people like you "deadbeats", you know?

[LouGots]

09:09 PM on 04/07/2011

That's backwards. They can people who can buy what they want and pay for it all, "Sir."

Deadbeats are the ones who don't pay what they owe. I've been behind on bills, and I've been in the clear--"Sir" is a lot better.