Lawmakers are calling for a repeal of the regulation that caps the fees banks can collect from store owners when customers swipe their debit cards – something that generated millions for banks.
The regulation, part of the Durbin amendment to regulate the finance indstry, has led banks to increase other banking fees, including monthly debit card fees, to make up for the losses.
Legislation to repeal the Durbin amendment was introduced this week in the House of Representatives. Congressman Jason Chaffetz (R-Utah) and Congressman Bill Owens (D-N.Y.) are the lead co-sponsors. The bill has picked up support from The Electronic Payments Coalition, a Washington D.C.-based organization.
“The Durbin amendment was forced into law despite repeated warnings from consumer advocates, regulators and economists on the dire consequences that await consumers,” said Trish Wexler, spokeswoman for The Electronic Payments Coalition.
Last month, Bank of America announced it would charge $5 monthly fee starting in 2012 for use of its debit cards. Other banks are considering the move. The announcement has been among the most talked about issues in banking news this month.
“We now see this unfortunate situation for consumers playing out in the form of higher costs to own and use a debit card, with no promise from merchants that any of the savings will be passed on at the register,” Wexler said.
The Colorado Bankers Association supports the repeal of the Durbin amendment, said Don Childears, president and CEO of CBA. He called the Durbin act and cap on collection of fees from merchants “price fixing on a business-to-business service where government interference literally dictated that banks lose money on every single swipe of a debit card.”
The Dubin amendment is an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Supporters of the Durbin amendment say that it was meant to help consumers because merchants in a wrangling over competing prices, would lower prices.
Childears said he expects that consumers will never see the savings from the in-store debit card swipes.
“Banks are struggling to replace the $15 billion of lost income annually — $300 million per year for banks in Colorado,” Childears said. “That is a major piece of income that is justified by the very real expenses in handling debit cards.”