Washington , DC – Yesterday, U.S. Rep. Ed Perlmutter (CO-07) co-sponsored bipartisan legislation introduced by by Rep. Shelly Moore Capito (WV-2) to help protect consumers, small businesses and rural and small community banks and credit unions from price fixing by the federal government.
Perlmutter co-sponsored HR 1081 because of concerns about the impact a provision in the Dodd-Frank Wall St. Reform act would have on consumers and small businesses.
"Consumers need more choices in the way they manage their money - not fewer," said Perlmutter. "Unfortunately, this attempt by the government to regulate debit card transactions could limit the ability of consumers to use their debit cards and cut off access to many banking services like free checking accounts."
Perlmutter continued, "While our economy is gradually recovering, consumers should have access to the financial products they need and businesses must have certainty in their operations so we can keep the circulatory system of our economy moving. We have to be careful to not over-regulate while at the same time taking the necessary steps to ensure consumer protection. This bill provides regulators the time they need to write responsible rules ensuring consumers and small businesses are treated fairly. I've said all along that there were likely going to be issues we needed to fix in legislation of this magnitude. This is one of those provisions."
Under an amendment to the Wall Street Reform bill inserted at the last minute in the Senate, the Federal Reserve has to make a rule capping the fee businesses pay per debit card swipe at 12 cents, regardless of the size of the transaction. Changing their systems to comply with this rule could end services like free checking or limit the number of debit card transactions a consumer can make because of the burdensome costs of implementation.
The bill calls for a one year delay of implementation of section 1075 of the Dodd-Frank Act (Durbin Amendment). During the delay the Federal Reserve, OCC, FDIC, and NCUA will conduct a study with two main components. The first is a study of all of the costs associated with the debit transaction. The second is an impact study that will examine the effect of the Federal Reserve’s proposed rule on consumers, debit card issuers, merchants, and an impact study on the network exclusivity and routing provisions. The regulators will have 8 months to conduct the study and will then be required to report back to Congress with an analysis of the results of the study and recommendations if the statute or the rule need to be revised. Within the revision of the rule, there is a trigger that sets off a re-write of the rule if two of the regulators determine that any one of the following are true: the Durbin amendment or the proposed rule does not encompass ALL costs AND investments associated with debit card transactions; consumers will be adversely affected; and the small issuer exemption doesn’t work. The Federal Reserve will have four months to re-write the rule and submit for comment.
Co-Sponsors -- 16 Republicans and 12 Democrats
Rep. Wasserman-Schultz, Rep. Leutkemeyer, Rep. Renacci, Rep. Perlmutter, Rep. Hensarling, Rep. Royce, Rep. Canseco, Rep. Neugebauer, Rep. Bachmann, Rep. Meeks, Rep. McClintock, Rep. Carney, Rep. Gibbs, Rep. Peters, Rep. Herger, Rep. Marchant, Rep. Kelly, Rep. Bartlett, Rep. Chaffetz, Rep. Kissell, Rep. Gary Miller, Rep. Kildee, Rep. Carolyn McCarthy, Rep. Polis, Rep. Connelly, Rep. Bill Owens, Rep. Lynn Woolsey
Supporters of Delaying Rulemaking
Consumers could be forced to pay more as a result of the rule.
“The statute limits the -- the interchange fee to the incremental cost associated with an individual transaction, which does not cover the full cost, if you include some fixed costs associated with setting up a debit card program, for example. So it's certainly possible that some of those costs would get passed on to consumers in some -- in some way, for example, a charge for a debit card or something like that.”
“If they are forced down to the 12 cent level, that is going to -- to reduce the income that they get for debit cards, so I think they're going to have to make that up somewhere, probably by raising the fees that they have on transaction accounts. . . That would not be helpful for consumers and that might be an unintended consequence.”
The implementation of the rule should be delayed to allow for more careful study.
"...no conclusive studies have been offered to fully predict the impact of this rule...Given the complexity of this issue, we believe that it should be further examined fully to ensure that it does not have a negative impact on the communities it was meant to help. We believe this rule should be thoroughly and expeditiously reviewed prior to implementation, allowing a full and appropriate impact study to be performed to ensure that it will not raise fees or otherwise harm at-risk communities, including communities of color."
-- Hilary O. Shelton, NAACP Washington Bureau, in a March 7, 2011 letter to Speaker Boehner
“I think the full policy ramifications, who's paying for what, who's going to pay more, and who's going to pay less under this is something that maybe wasn't dealt with as thoroughly as it might have been.”
“We agree with you. This -- this really needs to be fixed.”