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Senate votes to cut banks' fees for debit card transactions

WASHINGTON — Striking at a lucrative bank business, the Senate on Thursday voted to force credit card companies to reduce fees for debit card transactions and permit merchants to offer customer discounts based on their payment method.

The 64-33 vote inserted the fee requirement in a package of new financial rules the Senate is considering to ward off a repeat of the financial crisis.

The vote was a major defeat for banks, which lobbied hard against it. But the measure attracted heavy bipartisan support and surpassed a 60-vote threshold for passage.

The measure from Sen. Richard Durbin, D-Ill., would force credit card companies to charge businesses less for debit card transactions than for credit card payments.

Under current practice, a business that accepts major credit cards signs agreements with the card companies to pay a percentage of each transaction, usually about 2 to 3 percent. But credit card charges cost more to process than swipes with a debit card.

The measure still needs to survive negotiations with the House, which has already passed its version of regulations on Wall Street. The House bill does not contain the debit card provision.

The change would represent the most direct and tangible consumer benefit of the regulatory overhaul and would amount to a triumph for Durbin.

In an effort to win more support and avoid community bank opposition, Durbin included an exception from the fee requirement for banks with assets of less than $10 billion.

Senate votes to cut banks' fees for debit card transactions 05/13/10 [Last modified: Thursday, May 13, 2010 9:28pm]
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