Banks want higher debit-card ‘swipe fees,’ but an effort to allow them has crumbled

Banks had hoped Congress would let them charge merchants higher fees to process debit card purchases, but an effort to allow that has crumbled — a victory for retailers and, possibly, shoppers who might have had to shoulder those costs.

In the latest chapter of a long-running fight, a repeal of federal limits on so-called swipe fees no longer will be part of a House financial regulation bill, said the legislation’s author, Rep. Jeb Hensarling (R-Texas).

For the record:

12:10 a.m. June 30, 2022An earlier version of this article said Hensarling issues his statement late Thursday. He issued it late Wednesday.

Hensarling, chairman of the House Financial Services Committee, said he decided to strip the provision from the bill because many lawmakers are balking at removing the limits.

“We won’t let this one provision hinder passage of an important priority bill that will end bank bailouts and help renew healthy economic growth for all Americans,” Hensarling said of his Financial Choice Act in a statement late Wednesday.

Retailers — including big players such as Wal-Mart Stores Inc. and Target Corp. — argued that banks charged much more than necessary to process debit card transactions as that method of payment became more popular. Those fees were passed on to consumers, retailers said.


In 2011, the Federal Reserve capped the fees at 21 cents per transaction, plus a small percentage of the purchase price and a possible 1-cent fraud prevention adjustment. The limit was well below the average 44-cent fee retailers were paying at the time.

Banks strongly objected to the cap and have been fighting it ever since. They argued the limits didn’t take into account fraud losses and other costs.

Regulators were ordered to cap the fees by a provision known as the Durbin amendment — named for its author, Sen. Richard J. Durbin (D-Ill.) — that was included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Financial Choice Act, a sweeping dismantling of Dodd-Frank, included a repeal of the debit-card fee limits when the legislation was approved by the House Financial Services Committee this month.

“I’ve said before that repeal of the Durbin amendment was the most contentious part of the bill among Republicans,” Hensarling said. “I believe it belongs in the Financial Choice Act, but I recognize and respect that many members of Congress feel differently.”

Durbin said there was a bipartisan consensus to keep the fee limits he championed.

Repealing the caps “would be like dropping an $8-billion-per-year tax increase on Main Street businesses, causing prices to spike at the grocery store and the gas pump, all for the benefit of big banks already making record profits,” he said Thursday.

The National Retail Federation trade group said Hensarling’s decision was “a major victory” for consumers.

“Repeal of reform would have allowed banks to return to the uncompetitive market that allowed them to set these fees as high as they liked,” said Mallory Duncan, the group’s general counsel. “The progress that was made toward competition would have been lost, and consumers would have seen nothing but higher prices.”

The banking industry hasn’t given up the fight, although there appears to be little appetite in the Senate to repeal the fees.

Rob Nichols, president of the American Bankers Assn., said the cap amounted to “government price controls.”

“Until it’s repealed, big-box retailers will continue to reap the billions in profits they promised to pass along to their customers,” he said. “That’s wrong and Congress should fix it.”

Twitter: @JimPuzzanghera


10:50 a.m.: This article was updated with comments from Sen. Richard Durbin.

This article was originally published at 9:40 a.m.