Florida's U.S. senators are putting the financial interests of the nation's biggest banks before small retailers and consumers. Democratic Sen. Bill Nelson and Republican Sen. Marco Rubio voted this week to delay lowering the fees that banks charge retailers every time a debit card is used. There is no justification for such stalling, and fortunately Nelson and Rubio were on the losing side of the Senate vote.
As part of the Dodd-Frank financial reform bill passed last year, the Federal Reserve was directed to issue rules cutting the excessive processing or "swipe" fees that merchants are charged by Visa, MasterCard and issuing banks for each debit card transaction to something that is "reasonable and proportional."
The Federal Reserve's proposal, set to take effect in July, would reduce swipe fees from an average of 44 cents per transaction to 7 to 12 cents. Small banks with less than $10 billion in assets are exempt from the new limits. Government intervention was needed because perverse incentives pushed the industry leaders, Visa and MasterCard, to raise swipe fees to entice banks to issue more debit cards. Yet merchants had little opportunity to resist the fee increases — other than refusing plastic altogether. As a result, swipe fees have tripled since 2001 even as technology has been bringing processing costs down.
While those fees brought in astronomical sums for Visa, MasterCard and the big banks, topping $20 billion last year, they hurt mom and pop merchants that operate on narrow margins. Consumers, too, felt the brunt of the fees in the form of higher prices.
With the gravy train coming to a stop, an army of bank lobbyists was dispatched to forestall the Federal Reserve's actions. In a vote Wednesday that would have delayed the new swipe fee limits, 12 senators who had voted last year to cap the fees succumbed to the pressure and sided with the banks. The final vote was 54-45 in favor of the delay, but 60 votes were needed for approval in accordance with Senate rules.
Nelson, who voted with the banks Wednesday, was absent when the issue previously came up. His spokesman said the senator was traveling to Florida for a shuttle launch at the time, but that he always favored delaying implementation because the new rules don't ensure that the savings were passed along to consumers — an unsatisfying explanation. Rubio, who wasn't in office during the prior vote, also sided with the big banks.
Most troubling is that Wall Street's generous campaign contributions and lobbyists are wearing down congressional support for muscular oversight of the financial industry. This will become even more important as issues such as the structure of the new Consumer Financial Protection Bureau and the strength of regulations on derivatives are debated. Nelson and Rubio should stand with federal regulators and Florida consumers, not the financial industry.