Debit Card Lies

Senate REJECTS delay of debit-card regulations, ends K-Street battle

By Alexander Bolton - 06/08/11 02:45 PM ET

“It’s our choice about whether or not these banks are going to prevail or not,” Durbin said. “And history will record the strength of consumers, and small businesses across America against the Wall Street banks who take away more than half of the interchange fees on debit cards that are collected across America.”

A bipartisan coalition of senators on Wednesday rejected a heavily-lobbied proposal to delay regulations on debit card fees, which will save retailers and cost banks billions of dollars in revenue.

Fifty-four senators voted in favor and 45 voted against the measure, which needed 60 votes to pass. Nineteen Democrats joined 35 Republicans voting yes.

The vote is a major victory for Senate Democratic Whip Dick Durbin (Ill.), who sponsored legislation last year directing the Federal Reserve to review the fees banks charge on debit transactions.

Durbin's side was supported by 12 Republicans and 32 Democrats, plus independent Sen. Bernie Sanders (Vt.). Joe Lieberman (I-Conn.) did not vote.

The Fed is on pace to issue final rules by July 21 that could cap fees at 12 cents per transaction, a fraction of the 44-cent average banks now charge.

Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), backed by a well-financed banking lobbyists, led the charge to require the Fed to delay its rulemaking process to allow for further study.

Durbin, however, charged it was a veiled effort to kill the rulemaking process and argued the agency, which has collected 11,000 comments on the issue, has studied the proposed rule long enough.

The contentious issue split the Democratic leadership. Senate Majority Leader Harry Reid (D-Nev.) sided with Durbin.

Senate Democratic Policy Committee Chairman Chuck Schumer (N.Y.), the third-ranking member of the Democratic leadership and Durbin’s rival to succeed Reid as leader, voted with Tester and Corker.

The policy fight triggered the biggest K-Street battle of the year and may have helped Tester collect tens of thousands of dollars in contributions from banking interests.

Public fundraising records show Tester collected nearly $60,000 in contributions from credit card companies and other opponents to proposed caps on swipe fees in the 17 days following the introduction of his legislation.

Speaking before the vote, Tester downplayed the influence of banking lobbyists and contributions.

“Look at me. Do I look like a banker?” said Tester, a burly farmer who still sports a flat-top. “Senator Corker and myself drew this amendment up. The banks did not draw up this amendment.”

Durbin said throughout the debate that he has the highest respect for Tester and held no animosity toward his adversary. Even so, the issue appeared highly personal to Durbin, who delivered a ringing, impassioned speech before the vote.