WASHINGTON — Merchants triumphed over bankers in a battle for billions Wednesday as the Senate voted to let the Federal Reserve curb the fees that stores pay financial institutions when a customer swipes a debit card. It was murkier, however, whether the nation's consumers were winners or losers.
As a result of the roll call, the Fed will be allowed to issue final rules on July 21 trimming the average 44 cents that banks charge for each debit card transaction. That fee, averaging 1 to 2 percent of each purchase, produces $16 billion in annual revenue for banks and credit card companies, the Fed estimates.
The central bank has proposed capping the so-called interchange fee at 12 cents, though the final plan could change slightly.
Victorious merchants said the lowered fees should let them drop prices, while banks said they could be forced to boost charges for things like checking accounts to make up for lost earnings — and each side challenged the other's claims. Consumer groups were not a united front, either: While the consumer group U.S. PIRG said consumers would benefit, the Consumer Federation of America took no formal stance.
Travis B. Plunkett, the consumer federation's legislative director, said the amount of savings that stores pass on to consumers would depend on how competitive their markets are. He said he also worried that the Fed's current proposal might be too restrictive, which might tempt banks to "use that as an excuse to increase charges on customers they value the least, low- to moderate-income customers."
In Wednesday's vote, senators trying to thwart the Fed's rules needed 60 votes to prevail but fell short, 54-45. That delivered a victory for Sen. Richard Durbin, D-Ill., the Senate's No. 2 Democrat, who muscled the provision into last year's financial overhaul law.
Edmund Mierzwinski, consumer program director for U.S. PIRG, which represents state public interest research groups, said some banks might curtail the rewards programs that many attach to their debit cards, such as awarding cash back or airline miles. But he said checking account fees would not rise.
"There will be competition," Mierzwinski said. "Banks will be forced to come up with innovative ways to lower costs in their card networks."
Camden R. Fine, president of the Independent Community Bankers of America, challenged that, saying the Senate vote would mean that "consumers of lower socioeconomic status will get hammered" because bank fees would rise.
"Where do people think banks get the money to subsidize these products" like free checking accounts, he said. He also challenged assertions that stores would pass the savings from lower fees to customers.