Durbin basks in 'swipe fee' win

Monday, May 17, 2010 By: Greg Hinz

U.S. Sen. Richard Durbin is, frankly, amazed that the stars actually aligned. And ultimate victory still is not guaranteed.

But the Illinois Democrat is doing a lot of grinning — for good reason — after triumphing over the powerful banking industry in last week's vote to allow the Federal Reserve Board to cap the "swipe fees" that financial institutions impose on the use of debit cards.

Mr. Durbin has been trying for years to impose some limits on the fees, which he says have little relation to how much it costs banks to actually provide the service. Though banks say they need to prop up their bottom line, he says "you can't believe" how onerous things have become.

Mr. Durbin prevailed because he enlisted an arguably even more powerful lobby on his behalf: small merchants, who often end up eating the cost of interchange fees of 1% to 3% of each purchase.

Groups like the Merchants Payments Coalition, which claims to represent 2.7 million retailers and other small companies, went to work. And Mr. Durbin agreed to apply the bill only to financial firms with at least $10 billion in assets.

Still, Mr. Durbin says he was surprised. "Heading into that vote, I would have told you we were going to lose," he says.

Instead, the measure passed 64-33, with a stunning 17 Republicans voting "yes."

Another key provision of the bill allows merchants to offer discounts for use of debit cards and to require a minimum purchase to charge an item. Those, too, will be popular with consumer groups.

But the underlying financial reform bill to which the Durbin amendment was attached still has to clear the Senate and, if it makes it, must be left in the bill by a House-Senate conference committee.

But with 17 Republicans on his side, this one is worth watching.