Rep. Ted Budd, R-13, has advocated for the repeal of Dodd-Frank financial services regulations since taking office. More recently, Budd has focused his attention on a specific provision in the bill that caps fees charged for debit card processing — the Durbin Amendment, which was passed in 2010 as part of Dodd-Frank. Retailers pay the fees when shoppers pay with a debit card.
Repealing the Durbin Amendment is opposed by many retailers, who say caps on debit card fees protect small businesses. But bankers support a repeal, saying the Durbin Amendment hurts the very people it was intended to protect.
Budd, who sits on the House Financial Services Committee, says caps on debit card fees have forced banks to raise fees in other areas.
“That cap, in essence, has forced banks to raise the cost of checking for low-income consumers on low-cost checking accounts,” Budd said. “In order to keep their doors open, they’ve had to find fees elsewhere.”
Budd said he would not support a repeal of the Durbin Amendment if he had his “retailer cap” on. Before being elected to Congress, he ran a gun store. Now, Budd said he supports a repeal because of its broader effect on the economy.
He said repealing the Durbin Amendment would provide greater pricing flexibility for banks, both big and small.
“Banks are here for us. They are here to help us,” Budd said. “They are just as helpful as the small business on the corner, and they really sit at the heart of the recovery.”
Local bankers agree with Budd.
“Anytime a bank is healthier from a profitability standpoint, they’re able to do more from a community standpoint,” said Brian Miller, a Salisbury city councilman who works for BB&T.
Steve Fisher, chairman and CEO of F&M Bank, said there’s no evidence that retailers lowered prices, as promised, as a result of the cap on debit card fees. Citing a study by the Federal Reserve Bank of Richmond, Virginia, Fisher said 18 merchants raised prices for every one who lowered prices.
“Durbin simply created a windfall for the nation’s largest merchants and higher costs for the very consumers that Durbin was alleged to benefit,” Fisher said in an emailed statement. “The price of this windfall is born by the consumers on both sides of the Durbin Amendment. Consumers are paying higher prices at the register, and their banks are no longer able to provide value-based products such as free checking. The consumer is being squeezed in the middle.”
Retailers frame the argument differently.
Kevin Lawlor, a spokesman for Alliance for Main Street Fairness, said large banks would be able to collect more money from debit card fees if the cap is repealed.
“We think that swipe fees protect small businesses and, by protecting small businesses, protect consumers,” Lawlor said.
The goal of a repeal, he said, is to deregulate transactions and allow banks to “charge whatever they want.” If banks raise the fees, Lawlor said, small businesses might pick up the new charges or pass them along to the consumer.
The Alliance for Main Street Fairness, an advocacy group that represents businesses, says ending the debit card fee cap would dramatically increase the cost of accepting debit cards for businesses.
Budd said a repeal could cause debit card fees to increase but they could also go down.
“It’s going to allow that flexibility,” he said. “I think flexibility is what’s needed, whether that’s up or down or staying the same.”
Asked about the potential for exorbitant swipe fees, Budd said, “It just doesn’t work” to charge $5 for a 50-cent drink.
Budd said he has asked that there be “no backroom deals” to remove the repeal from a larger measure known as the Financial Choice Act. If the Durbin Amendment repeal is removed from the larger bill, Budd said he wants a vote on it.
The Financial Choice Act has passed through the Financial Services Committee and is awaiting consideration from the full House of Representatives. Budd’s press secretary, Melissa Brown, said the bill will be considered by the Rules Committee before it comes to the full House.