This was a vote on an amendment by Sen. Jon Tester (D-MT) that would have delayed for one year a regulation that limited debit card fees charged by banks to retailers. This amendment was offered to legislation authorizing federal funding for Commerce Department economic development programs.
Specifically, a financial regulatory reform law signed into law by President Obama in 2010 empowered the Federal Reserve to limit debit card fees charged to merchants. Such fees—known as “interchange fees” or “swipe fees”—are charged to retailers each time a consumer makes a purchase with a debit card. Swipe fees averaged 44 cents per transaction when the financial reform law was enacted. Acting on its authority under that law, the Federal Reserve announced a plan to limit swipe fees to 12 cents per transaction. Tester’s amendment would have prevented the 12-cent limit on swipe fees from taking effect for one year.
[The financial reform law’s limit on swipe fees—which was scheduled to take effect on July 21, 2011—only applied to banks with more than $10 billion in assets. Thus, smaller “community banks” were exempt from this regulation.]
Supporters of a limit on swipe fees argued that merchants simply passed those fees onto consumers by charging higher prices for products. Opponents of limiting swipe fees—especially banks and their political supporters in Congress—argued that a limit would cut into banks’ profits and force them to increase other fees in order to make up lost revenue.
Tester urged support for his amendment: “Based on the law, the Fed [Federal Reserve] intends to limit those costs to 12 cents, even though the actual costs of these transactions may be higher. The big Wall Street banks can handle that. They are not happy about it, but they can live with it. They have plenty of tools that will help them make up the difference. The Main Street community banks and credit unions are a different story. These small guys, who had nothing to do with the financial crisis, do not have that same flexibility the Wall Street banks have. These are the banks in Montana. These are the folks I want to make sure have a fair shake. So folks from both parties came together and said: How can I fix this to make this protect the local banks and credit unions since the original amendment does not?...Before the Fed's new rules get implemented, let's make sure we have them correct.”
Sen. Dick Durbin (D-IL), the chief proponent of a limit on swipe fees during debate on the 2010 financial reform bill, opposed Tester’s amendment: “This amendment is a big bank windfall. The amendment has been described as an effort to help small banks, but it would undoubtedly be a windfall for the nation's largest banks. It would give them a free pass to continue their anticompetitive practices for at least another year, and then it would require the Fed to write rules in a way that would enable big banks to justify the fees they are charging today. It is a no-change amendment. If you believe, as a member of the Senate, the current system is fair to businesses across America and we shouldn't change it, then voting for this amendment will guarantee your position will be enshrined in law. This proposed amendment is a gift to the big banks that will keep on giving and deny swipe fee relief to small businesses and consumers who desperately need it.”
The vote on Tester’s amendment was 54-45. Voting “yea” were 35 Republicans and 19 Democrats. 32 Democrats—including a majority of progressives—and 12 Republicans voted “nay.” While a majority of senators supported this amendment, 60 votes were required for passage under a “unanimous consent” agreement (literally, an agreement reached among all 100 senators). Since Tester’s amendment did not receive the support of 60 senators, the measure failed. As a result, the Senate rejected an amendment that would have delayed for one year a regulation that limited debit card fees charged by banks to retailers to 12 cents per transaction. Thus, the 12-cent limit on swipe fees remained scheduled to take effect on July 21, 2011 (roughly six weeks after this vote occurred).