retail news in context, analysis with attitude reports this morning that the amendment to the Wall Street reform bill designed to limit interchange fees on credit and debit cards, introduced by Sen. Richard Durbin (D-Illinois), passed the Senate yesterday 64-33. Some of the opposition, the story notes, came from moderate Democrats who want to fast-track the overall reform bill so they can campaign on it for the November elections.

“Democratic moderates worry that the new rules would hurt community banks that rely on the merchant fee to cover the cost of providing credit cards,” Politico writes.

According to the story, “Durbin’s amendment requires the Federal Reserve to oversee the fees banks charge merchants when their customers use debit cards. It includes an exemption for banks with less than $10 billion in assets.

“Trying to win over his colleagues, Durbin increased the amendment’s carve-out for the smaller banks. Originally drafted to exempt banks with less than $1 billion in assets, Durbin increased the limit to $10 billion to ameliorate their concerns. And when that move failed to sway the Independent Community Bankers of America, Durbin lit into the group, questioning its independence from the big banks. ICBA, Durbin said, is one of the 25 biggest issuers of plastic in the country. “‘They profit from the fees, just like the big banks do,’ he said. ‘They don’t come to their opposition with clean hands. They have a profit motive in opposing this amendment.’
“ICBA lobbyist Jason Kratovil said the organization’s bank card division was created to help community banks afford to get into the debit card business by pooling their resources. The system works because neighborhood banks and behemoths like Bank of America receive the same fee for identical purchases. If the big banks are forced to accept lower rates, merchants will choose their cheaper cards over those of community banks, Kratovil said. But Durbin said that merchants would have to accept all cards in a network. If, for instance, a store accepts Visa, the merchant would have to accept all Visa cards regardless of what bank issues them.”

Retail industry groups came out in favor of the passed amendment.
“Today the Senate took a major stride toward restoring fairness and reason to the debit card interchange fee system by approving Senator Durbin’s amendment,” said Leslie Sarasin, president/CEO of the Food Marketing Institute. “Requiring that the fees be based on the actual cost of debit card payments will generate significant savings, benefiting retailers and, ultimately, consumers. Customers will benefit as the amendment allows retailers greater flexibility in offering them discounts for lower-cost forms of payment.”

“Main Street America bailed out the biggest banks in this country not so long ago,” said National Retail Federation (NRF) Senior Vice President and General Counsel Mallory Duncan. “Passage of the Durbin amendment ensures that those same banks won’t repay our generosity by undermining the fairness and integrity of the checking and debit card system.”

And John Emling, senior VP for government affairs at the Retail Industry Leaders Association (RILA) said, “This is a great victory for consumers and retailers, small and large. With this vote today, the U.S Senate has stood up to defend consumers and retailers, small and large, protecting them from the excessive fees and anticompetitive practices imposed by big banks and credit card companies.” 
KC's View:
Sorry to say, but it is really hard for me to work up any sympathy for the banks. Any banks. That may not be fair, but so it goes.