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Bank Lobby Says ‘Fight Continues’ on Debit Card Fees, Warns of ‘Dire Consequences’

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(iStockphoto)

The banking industry stands to lose billions in debit card transaction fees after losing one of its biggest lobbying battles this year—but for the banks, that was just Round One. 

The industry had for months lobbied lawmakers to kill or delay regulations limiting the fees that banks get from retailers whenever a debit card is used. Earlier this month, a bill to delay the rules failed to pass in the Senate—disappointing the banks and delighting retailers who will save some revenue to either pocket, pass on to consumers in lower prices, or spend on their businesses some other way.

But the banking industry hasn’t given up.

“The fight continues,” the president of the American Bankers Association, Frank Keating, wrote in a letter to members earlier this month. “With every battle the banking industry is becoming a stronger political force.” Keating vowed to continue putting pressure on the Federal Reserve, which wrote the rules, and on Monday he fired off a letter to the Fed [PDF] urging revisions to the rules “to mitigate the harms” to banks.

In arguing that a 12-cent cap on debit transaction fees was too low, the trade group urged the Fed to reconsider how much it costs the banks to process individual debit transactions, arguing that a broader range of costs—such as overhead costs, fraud losses, and the cost of customer service reps to resolve disputes—should be factored into the calculations. The Fed, as we’d noted earlier, excluded certain infrastructure costs when it determined what would be a reasonable fee cap, arguing that they would be incurred even if a particular transaction didn't occur. 

The group also requested that they be given a three-month window to comply with the rules, which are scheduled to go into effect July 21. The Dodd-Frank financial reform bill originally had this window built in—the rules were scheduled to be finalized in last April and go into effect in July—but regulators put off the first deadline after industry lobbying.

Failure to ease the rules and minimize the harm to banks “will have dire consequences,” Keating wrote, saying that banks will lend less and start charging for certain services, thus driving out low-income consumers.

(It's worth noting that bank lending is already down, and low-income consumers often end up paying for “free” checking, which often requires direct deposits or minimum amounts.)

Community banks and credit unions are technically exempt from the rules that cap debit transaction fees for the biggest banks, but they’ve opposed the rules anyway—afraid that differences in fees will cause merchants to start discriminating against their debit cards. Keating stressed this point as well in his letter, noting the “great harm to banks throughout the country, and particularly to community banks.” (Read the full letter.)

According to the Wall Street Journal, industry lawyers and executives are waiting for the final rule, and if the rules aren’t changed, are likely to sue

Grant Beaudette

June 21, 2011, 12:16 p.m.

I know there’s no relation, but maybe putting a guy named Keating in charge of your giant bank lobby wasn’t the best idea.

Stephanie Palmer

June 21, 2011, 1:14 p.m.

Banks are leaches. They always have been leaches, they always will be leaches.  They only serve to move money around. Nothing they do is done without charge, they are not your friends.

They, the big banks (to big to fail), are relentless. They will eventually get their way. We lose, they win.

Time to move to your credit union or a solid community bank.

@ Grant - excellent point (LOL)! I personally don’t believe anything the banking industry says as they care about one thing only - $$$ & have taken advantage of this country for decades. “Banks stand to lose billions” - so be it, but the “dire consequences” will mostly be felt in the bonuses of the industry’s CEO’s and top executives. Lending is down drastically because of their own greed - greed that caused a massive recession, massive unemployment and the foreclosure crisis. Those with lower income and on fixed incomes overwhelmingly now use debit cards - primarily due to the tens of billions banks charged in NSF fees over for the past few years. Checking accounts have never been “free” either because regardless of how carefully people with lower incomes monitor their checking account the banks manage to charge at least one or two NSF fees a month - until they faced investigations and legislation. I, along with millions, want Treasury to not bulge on its stance with this issue and finally impose reasonable banking rules for the people of this country. It is also past time that the Senate stand up for the people as well with this law and protect the country from big banking interests..

“Too Big to Fail” occurred because of de-regulation, incompetence and greed and almost destroyed the U.S.and its people.

A couple of points: 1) What do debit card (accessing a bank liability) fees have to do with lending (a bank asset)?  In other words, the banks argument implies that users of debit cards and the merchants that accept them are subsidizing lending activities.  Borrowers should pay their own way; 2) If the banks are concerned with their costs, why don’t they implement chip based (smart) debit cards with a PIN, like those used in Europe.  The fraud rates in Europe are significantly lower than the US because of this system.  I’ll tell you why they don’t, because the banks use the fraud argument to justify their high fees.

Don’t believe for a minute that the Wal-Marts of the world are fighting high debit transaction fees for our (the consumer’s) benefit, but consumers are more likely to benefit from the highly competitive retail industry getting the revenue than from the oligarchy banking industry keeping it.

acmodspecialists

June 21, 2011, 2:25 p.m.

The banks are like Gangsters, that is why I call them “Banksters”  all they know hoe to do is threaten is called extortion “will have dire consequences,”

Two words to make a banker go ballistic:

Credit. Union.

I just got an email from my new republican senator that parroted all the talking points of the Banking Industry Lobby letter. I can’t believe how much pressure this industry has brought to bear on Congress and how little backbone the elected representatives have. Very dissappointed, but not surprised.

Banking today is synonomous with bilking. The banks are so accustomed to their right to bilk, I can understand that they see it as a real hardship if it’s restricted. If they had to compete once again using fair business practices, they would have to acquire an entirely new set of skills.

Lynnda Laurie

June 21, 2011, 4:29 p.m.

What did the banks do to “Mitigate the Harm” to people going through foreclosure?  What dire consequences?  Smaller 6 figure bonuses instead of 7 and 8 figure bonuses?

“...delighting retailers who will save some revenue to either pocket, pass on to consumers in lower prices, or spend on their businesses some other way.”

Seriously?  Option one is *always* chosen.  Option three is used sometimes.  Option two is only ever chosen if there is a strong competitive environment.

Overall, this fight is about whose pocket the money goes into; not about how the consumer may benefit.

Richard McDonough

June 21, 2011, 5:25 p.m.

Banks do not love us.  They need us but they do not love us.  Anything they want to do should be looked at very carefully.  They should have very limited powers, of course, but the congress and the un-regulatory agencies have again and again sweetened that pot for them The only less useful people in the “financial industries” are insurance companies.

“Mitigate the harms to [banks].”

REALLY?? Never known a bank or an underwriter that lost money.

Shaun Litchfield

June 21, 2011, 8:53 p.m.

“With every battle the banking industry is becoming a stronger political force.”

What on earth does that mean? The Banking Industry imploded the economy and now “they’re” worried about the money it has lost? Is this ironic or just plain pathetic?

I did not read the article nor do I feel i have to. right now as i’m pseudo reading this I’m listening to Cracker doing “I Want Everything,” for the banking industry they mean it,,,, I want huge bonuses, I want to be left alone to screw everyone out of everything, the common American doesn’t deserve anything I deserve everything for I’m a financial gawd and nothing else matters except my bottom line. Which I don’t have to worry about, for the public is too dumb to realize how bad I’m screwing them or they’re buying into the hope that they can join in the fun! How can it be that some people are still in their houses I need those houses, I mean I have down payments, I have payments, the odds were stacked against most homeowners I deserve everything, to hell with the American dream it’s bullshit anyway if you’re not a seemingly high risk banker or wall street greedtard. Then more power to you. Gee you poor bastards, sorry you believed in your country.

The relentlessness drive to overturn this law is brought about by simple desperation. They rely on this free money for what little liquidity they have left. The banks do not deserve these outrageous fees no matter the tripe they throw out. The Internet facilitates all of these transactions and the underlying business processes were put together years ago. The argument that
“...the Fed ... reconsider how much it costs the banks to process individual debit transactions, arguing that a broader range of costs—such as overhead costs, fraud losses, and the cost of customer service reps to resolve disputes—should be factored into the calculations.”
relies on the continuing ignorance about these basic facts. It costs them nothing. Computers have been programmed to do it.
As for the rest of the argument, give me a break. the customer service reps are props at this point, reading a script with no leeway for any sort of creative business dealings. They are poorly paid servants of the banking machine. As for fraud, that problem could have been cured years ago with smartcards. Europe decided to do just that way back when, while our banks are either too stupid or too greedy to do it, or their simply stooges of the card servicers.
Leave the law intact. Let the first few banks fail. Clean up the mess by replacing the deadheads in the boardroom. Watch the others come to full attention and get down to real business.

When I got my first debit card they were a brand new thing. I called one of the bank service reps and asked what would happen if I exceeded my balance at a checkout point? “Not a problem,” he said, “If the money’s not in your account, the charge just won’t go through. It’s all by computer.” I asked if I would be charged an overdraft fee. “No,” he said, “because nothing will have happened.” So, what happened?

The Walmart case released yesterday by the supreme court and Bank United of 2 years ago tells the whole story. The Congress of the United States, both houses,  and the Supreme Court are bought and paid for, only the presidency remains and if Obama doesn’t wake up, that will be in the hands of another republican puppet by Janaury 2013.

Frank Keating’s remarks about the Catholic Church may well be applied to the banking industry that he now represents:

““To act like La Cosa Nostra and hide and suppress, I think, is very unhealthy,”

“To resist grand jury subpoenas, to suppress the names of offend[ers], to deny, to obfuscate, to explain away; that is the model of a criminal organization.”

bogglesthemind

June 22, 2011, 11:39 a.m.

Why do we almost unfailingly elect the most inane into office?

All I can think of is how bad television is going to be during election season given the banks and the other predatory corporations start pouring money into “Citizens United”-enabled lies….

All sponsored by “Anonymous”, of course.

I believe it is too bad the government did not nationalize the banks to protect us from the banks.  The banks need to feel the pain so many Americans are feeling right now.  Their greed surpasses everything and could very well lead this Country into more of a disaster than they have currently brought upon us. 

I have switched my accounts to Credit Unions!

awwww! I feel so sorry for them.
The new regulations are a start, but do not go far enough to protect the consumer.

I say we put our cash in one pocket and a Gun in the other,  Take the banks out of the loop and kill anyone who tries to take your money….....Banks makes Billions, Middle class america gets screwed!  Pull all your money out and collapse the banking system.  Only then can it be rebuilt as a service to the consumer & society rather than a cash machine for the wealthy bankers and wallstreet.

Except for the gun part I agree Bill.  Good Job Mary.  I moved most of my money to a credit union, too.  We don’t want to collapse the system because it hurts us all, and the world, too much.  But slow, consistent withdrawals of our money from the big banks and investment firms will make a profound difference.  Where is the next Teddy Roosevelt?  We need him/her, and supportive Congressional representatives, to take on the banks and Wall Street right now.  We are the ones who made this country great and we can make it a country to be proud of again by voting for the right people.

moving money away from banks is a good idea but it won’t last that long as the banks will figure a way to have congress and the supreme court decide that credit unions are illegal.

this fight is much bigger than this very good article or the comments allude to. this is really life or death to the world as we knew it here in the USA some 50 years ago.

the criminals that are eating us alive, by chipping away at our rights one by one to produce this new world order, as it is referred to,  must be made to leave this country and i am afraid that only violence will make that happen.

we are 10 years away from an “Egypt” situation here.

This may seem like a tangent, but it is real and related.  Banks and business looseness regarding security is going to make debit fees irrelevant.  If a hacker gets your debit card info and withdraws the money from your account it is gone.  This has already happened on a large scale with the craft store Michaels.  As a matter of fact, a close friend lost a great deal on money from her account after a thief got her account information from the Michaels debacle. I have stopped using my debit card and switched to credit cards (where I am not on the hook for fraudulent charges).  If retailers and banks cannot keep the information secure, eventually it won’t matter what they charge.

Kathy, You are so right. Now I wonder if you don’t have a lot of money in a debit card account and no backup account with a lot of money—those trying to use a stolen debit card would be rejected from doing so, am I right?

I wonder why data associated with a debit card transaction is not kept at multiple security levels. If a hacker breached one security level they would have to breach at least two more. If the banks really cared you would think they would develop software applications that they sell to retailers and if they, retailers, did not have these applications they (the banks) would not accept any transactions from them.

This is a solvable problem if there was an incentive to do so.

I guess we should be encouraged that Congress will listen to the retail industry in this battle.  If it were just the banks vs consumers, we would be steamrolled.

@Kent:  The Republicans in Congress don’t dare come out against Main Street toooo often.  But avoiding revealing themselves to Main Street and the American people is not the same as avidly supporting Main Street and the American people.

For instance, some have observed that the U.S. Chamber of Commerce - that mouthpiece for the GOP, America’s HNWIs, banking, Wall Street, and the multinational corporate CEOs - has been curiously…silent…on the issue:

http://www.fixtheuschamber.org/tracking-the-chamber/chamber-sidelining-small-business-swipe-fees

My two favorite definitions of a Banker seem to apply to this article, to wit;

A Banker is the guy who loans you an umbrella on a sunny day, and asks for it back when it starts to rain.

The bigger the bank, the smaller the banker.

ibsteve2u:

if you notice the rhetoric from Boehner is always: we don’t want to do this or that and ends with “to the American people” this republican bs is always the same, they keep telling the same lie over and over until people believe it.

this problem is much more serious than people understand and its going to get worse unless we find the proper candidates and get out and support them.

this entire planned out program that we’re on now was talked about in the press 40-50 years ago by the John Birch Society. This country rejected Barry Goldwater in 1964 or this program would be further along than it is.

If people don’t wake up in this election cycle, the program may be irreversible by 2014 and 2016

Time for us in every state to quietly do what North Dakota did long ago - there is a Bank of North Dakota - a wholly owned state bank where all of the state transactions are conducted. No more free ride for the banking industry. The public has the option to bank at their state owned banks and thereby enriching the state or choose the outsider banks- where the money goes outside of their state. Great Idea! Check it out.

One more question - has anyone heard of those betting against raising the U.S. debt ceiling therefore making a lot of money (like double) when the Republicans refuse to raise the debt ceiling?

Is that buying the votes? Any way to know if those voting are betting against U.S.?

How does that work? Sounds like the financial industry and theirets for Greece’s “failure” when they were sold failure investments by the same financial industry. What the hell is that called—besides fraud? Bait and switch? Gaming the system? Derivative hedging? More “banking”?

One more question - has anyone heard of those betting against raising the U.S. debt ceiling therefore making a lot of money (like double) when the Republicans refuse to raise the debt ceiling?
Any way to know if those voting are betting against U.S.?
How does that work? Sounds like the financial industry and theirets for Greece’s “failure” when they were sold failure investments by the same financial industry. What the hell is that called—besides fraud? Bait and switch? Gaming the system? Derivative hedging? More “banking”?

One more question - has anyone heard of those betting against raising the U.S. debt ceiling therefore making a lot of money (like double) when the Republicans refuse to raise the debt ceiling?
Any way to know if those voting are betting against U.S.?
How does that work? Sounds like the financial industry and their bets for Greece’s “failure” when they were sold failure investments by the same financial industry. What the hell is that called—besides fraud? Bait and switch? Gaming the system? Derivative hedging? More “banking”?

supreme hats cheap

July 24, 2012, 7:05 p.m.

Nice article.Always nice to read some tips concerning the appearance of our blogs.
Wonderful articles, let me have to this admiration

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