US banks are stepping up efforts to win one of Washington’s fiercest lobbying battles with a push to end limits on debit card fees that they claim have failed to help consumers and handed retailers a $42bn windfall.
The American Bankers Association is hoping to capitalise on Donald Trump’s vow to “do a number” on the Dodd-Frank act as it fights limits on swipe card charges included in post-crisis reforms.
The lobby group has launched an advertising campaign with placements in publications including The Washington Post and Politico that take aim at the so-called Durbin amendment.
This requires the fees that banks charge retailers on debit card transactions to be “reasonable and proportional”. The restrictions do not apply to credit cards.
“Losing the revenues on the debit cards is a big deal for banks,” said Rodgin Cohen, senior chairman of the law firm Sullivan & Cromwell. “This is a very high priority for the industry. The regulatory burden consists not only of increased costs, but suppressed revenues.”
But banks have a fight on their hands over Durbin, not least because it pits them against the also-powerful retail lobby.
Some banking lobbyists, who are hopeful that parts of Dodd-Frank could be relaxed, acknowledge privately that their chances of ending the restrictions on card fees are slim.
Retailers argue the reforms have led to more competition on fees and that savings have been passed on to consumers. They are also planning to hit back with their own ad campaign.
Mallory Duncan, general counsel at the National Retail Federation, said the competitive nature of the retail industry meant the lower transaction costs had led to cheaper prices in stores.
He pointed out that banks had tried several times to repeal Durbin without success. “They [banks] have an uphill battle to convince members of Congress that removing competition is a good idea and that they ought to be allowed to go back to hidden, monopolistic fees.”
Banks have the backing of Jeb Hensarling, who chairs the House financial services committee. He is expected to include a move to row back Durbin when he introduces his financial choice act, which would undo large parts of Dodd-Frank.
However, the threat of a tumultuous lobbying war between banks and retailers will give pause to Republican leaders in the House and a move to repeal the Durbin amendment would face resistance in the Senate too.
Charles Gabriel, president of the policy analysis group Capital Alpha, said he doubted the move would secure enough political support. “This is forcing members to choose between two of the most powerful political constituencies in their districts [banks and retailers]. Why would they want to do that?”
But he added: “You’ve got this green light now, with Trump having won. You kind of have to try this. The [finance] industry has a chance to play offence.”
James Ballentine, executive vice-president of congressional relations at the American Bankers Association, said: “We will make the necessary investments to make sure victory is achieved.”
Additional reporting by Ben McLannahan
Get alerts on US financial regulation when a new story is published