Today's American Banker features a lengthy article on the building momentum in DC to reverse last year's interchange control mandate set by Congress. Just a month ago, most analysts dismissed the banking industry's chances of convincing Congress to delay, alter or repeal a Dodd-Frank provision limiting interchange fees on debit cards. Today, it has gained unexpected momentum after two top regulators testified that the provision will hurt community banks and credit unions without providing much benefit to consumers. Whether it's enough of a boost to get something passed through Congress is yet to be seen.
"There is no question that momentum is building within the House and Senate Banking committees and it is likely you are going to see some legislation introduced to try to address some of these issues," said Joe Engelhard a senior vice president with Capital Alpha Partners. "There is more of a recognition now in the key committees that there are some problems with the current language. Still, we don't really know where that is going to go."
So far, the industry's best chance is likely a delay in implementation of the provision. Under Dodd-Frank, the Federal Reserve Board is required by April to finalize a rule implementing the interchange cap. Lawmakers on both sides of the aisle have sounded open to delaying the rule so its impact could be studied. Members in both chambers may move as soon as next week to introduce bills that would delay the provision for two years to study the issue.
Interchange control opponents would have to convince at least a few senators that previously voted for the Durbin amendment to change their mind. Even if all the Republicans and all of the replacements for members who are no longer in the Senate, voted for the change, that still isn't enough. Democrats who voted for Durbin are needed to vote for a delay in order to get something enacted into law. Passing a narrow bill directed at the issue may prove tricky. Any legislation that re-opens Dodd-Frank is likely to become a magnet for re-writing other controversial provisions, including the creation of the Consumer Financial Protection Bureau and new derivatives regulations.
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