Caught Between JPMorgan and Wal-Mart, Congress Avoids Fee Rule

by Sarah Grotta 0

Those in the payments industry waiting and hoping for a swift end to the Durbin debit card interchange caps may be disappointed to read this article in Bloomberg News. It reveals the stark reality of how things get done, or don’t get done, in Washington. Durbin, and specifically the fee caps, is one hot potato for legislators since it appeals to two very important constituencies, banks and merchants. Unfortunately for legislators, they are on opposite sides of the argument, but both are important to suppling contributions:

The years-long lobbying fight has been reinvigorated by President Donald Trump’s call to rip up financial rules. Stuck in the middle are lawmakers from both parties who prefer cordial relations, and campaign contributions, from both sides.

“This is like choosing between children,‘‘ said Issac Boltansky, a financial regulation analyst at Compass Point Research & Trading. “It’s brutal for everyone involved.‘‘

It’s understandable that merchants don’t want the interchange rate caps to be removed, but even if Durbin caps are repealed, it is not certain that rates will return to pre-Durbin levels. It just means that the market will be able to determine the fee level. The largest merchants have unique negotiated rates, and are already paying less than the Durbin caps for many of their transactions. It is unlikely that fees would move up for these very important clients. The ability to increase interchange fees up much on other merchants would also be difficult considering their collective strength which has helped them to achieve favorable court rulings and legislative wins over the last decade. There will be one winner, however:

“This isn’t just about a bill, it’s about billable hours,‘‘ said Charles Gabriel, a financial regulation expert at Capital Alpha Partners in Washington. “It’s crunch time for all the lobbyists on both sides who’ve been fighting this for years.‘‘

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

Read the full story here