Jose Luis Magana, Associated Press
WASHINGTON — Bankers and merchants, pillars of the business world and frequent allies, are embroiled in a bitter lobbying battle over something Americans do 38 billion times a year — swipe their debit cards. Both sides vigorously claim to speak for consumers.
At stake is $16 billion annually that the Federal Reserve says stores pay to banks and credit card companies when customers use the cards — fees the Fed has proposed cutting.
Cut the fees, banks say, and they'll have to abandon free checking and boost other charges to consumers to recover lost revenue. Merchants say lower fees would let them drop their prices, though bankers say they doubt that would happen.
Currently, the fees typically range between 1 and 2 percent of each purchase, averaging 44 cents. The Fed has proposed capping that at 12 cents, though smaller banks could charge more. Bankers want lawmakers to delay the change in hopes that it will eventually be killed or toned down.
Patrick Lewis and Charles Garlock are foot soldiers in this fight's opposing infantries.
Each side is dispatching planeloads of hometown business people like them, along with armies of lobbyists and mountains of letters and e-mails to Washington. Some 4,000 local credit union officers swamped the Capitol last week, and around 300 merchants are buttonholing lawmakers this week. Unless Congress delays the deadline, the Federal Reserve must issue a final rule by April 21, to take effect three months later.
Lewis, a partner in 13 Oasis Stop 'N Go convenience stores in southern Idaho, was visiting Idaho lawmakers on Thursday urging them to back the Fed proposal. He said the $275,000 he pays yearly in debit card fees trails only payroll and his properties' mortgages and rents.
"I don't think her boss is necessarily on our side," he said spending a half hour with an aide to Rep. Mike Simpson, R-Idaho. "But maybe if we provide enough information it will change."
Garlock, president of the Rock Valley Federal Credit Union in Loves Park, Ill., said he would lose $150,000 to $175,000 annually if the Fed's proposed cut in fees is adopted, about one third of his credit union's net annual income.
"The little guys will be hit the worst. I can't sustain it," he said during his lobbying visit last week.
Though bankers are outspending their rivals on lobbying and campaign contributions and seem to have gained momentum, merchants so far have the upper hand. The bankers are trying to get Congress to undo legislation it passed just last year, a tall order on any subject.
Banks and merchants are often allied on such issues as taxes and regulation, but the debit card battle has driven them apart, each accusing the other of trying to pocket unjustified profits in what has become an emotional fight.
"Take a white kitten and put it out, and they will find ways to say how evil it is," Lyle Beckwith, lobbyist for the National Association of Convenience Stores, said of the bankers.
"This is as close to a pitchfork and torch issue as I've seen from our guys," said Jason Kratovil, lobbyist for the Independent Community Bankers Association.
Debit cards are now the most common way besides cash that consumers make purchases, according to the Federal Reserve. Though the transaction takes just a few moments, it is enabled by a vast behind-the-scenes system for preventing fraud and storing data.
When a customer swipes his debit card, he is tapping directly into his bank account to make a purchase. The debit card network, the customer's bank and the merchant's bank quickly exchange information and approve — or disapprove — the transaction, though the actual payment of money can take a day or two.
The battle is being waged with petitions, in newspaper and Internet ads and on the airwaves, too.
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