Jon Tester Backpedals In Multibillion-Dollar Swipe Fee Fight
WASHINGTON -- On Wednesday, Sen. Jon Tester (D-Mont.) softened his call for a two-year delay of the regulatory crackdown on debit card swipe fees. In the face of heated opposition from virtually the entire American retail industry, the Montana Democrat shortened his proposed waiting period to 15 months.
As The Huffington Post reported in April, the move to shorten the regulatory delay was widely anticipated; several senators told HuffPost they'd get off the fence and support the postponement if its duration was decreased. "The difference between 24 months versus 15 could very well be the difference between winning and losing," said one bank lobbyist. "It's very clear that Sen. Tester wants a vote and he wants to win it. That's a good thing for us."
But that didn't stop lobbyists for merchants from celebrating Tester's step back on Wednesday, claiming that the new proposal revealed a fundamental weakness in his political position.
After Tester advanced a shorter delay on Wednesday, the Merchant Payments Coalition -- a lobbying group representing retailers of all sizes -- pressed their perceived advantage, sending a letter to senators on Wednesday blasting his bill as an "abdication of good policy."
"The 'compromise' proposal would require the Federal Reserve to write ... wrong priorities into law by changing its rules to exalt bank profits over what is best for the country," the letter reads.
At issue are the fees that banks charge retailers for the courtesy of accepting their debit cards. Last year's Wall Street reform bill ordered the Federal Reserve to regulate those fees. The central bank has since proposed cutting them by almost 75 percent -- from an average of 44 cents per swipe to 12 cents.
This pocket change for a each transaction collectively amounts to billions of dollars every month. According to data from finance industry publication The Nilson Report, debit card swipe fees generate $1.35 billion for banks each month, or $16 billion a year. About $8 billion of that total flows to just 10 big Wall Street firms.
The delay effort is the first step in a longer-term effort from the bank lobby to repeal last year's swipe fee rules altogether. This corporate lobbying extravaganza pits not only major retailers like Walmart and Home Depot against the biggest Wall Street banks, but also the leaders of the Democratic Party.
This political struggle will determine much of the Democrat's future fundraising operations. Tester, who won a close 2006 election, was a recruit of Sen. Chuck Schumer. In office, he has adopted the New York Democrat's survival strategy: raise as much money from Wall Street as possible. Schumer and Tester are now sparring with Sen. Dick Durbin (D-Ill.), the author of last year's legislation to cap swipe fees, who is relying heavily on retailer funds.
The Fed's fee cap is scheduled to go into effect on July 21. While Tester's two-year delay bill has won over several supporters, he has thus far been unable to breach the 60-vote threshold needed to break a filibuster. Bank lobbyists hope that a shorter delay will be able to garner more votes.
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First Posted: 05/19/11 09:04 AM ET Updated: 07/19/11 06:12 AM ET