Banks, Biz Owners at Odds Over Debit-Card Fee Limits

U.S. Bancorp and TCF Financial Corporation have voiced opposition to proposed federal rules that would limit debit-card swipe fees-but some of Minnesota's small business owners are heading to nation's capitol to give their support.

Minnesota's two largest bank holding companies say that proposed new rules limiting debit-card swipe fees will hurt them, but the state's small business owners are pushing for the regulations to be enacted on July 21 as scheduled.

The limits under debate are for fees that merchants pass along to banks in exchange for being able to accept debit-card payments. They constitute the Durbin amendment-a portion of the Wall Street financial reform act, or the Dodd-Frank Act, that was passed by Congress in July 2010. The new limits only apply to banks that have $10 billion or more in assets.

Limits proposed by the Federal Reserve would cap debit-card interchange fees at 12 cents per transaction, displacing the current formula that averages 1.14 percent of the purchase price. But the banking industry is pushing bills that would delay implementation of the reform, which opponents say is an effort to repeal it altogether.

Minneapolis-based U.S. Bancorp recently joined Wayzata-based TCF Bank in voicing opposition to the proposed new rules. At a Thursday conference sponsored by Sanford C. Bernstein & Company in New York, U.S. Bancorp Chairman and CEO Richard Davis said that the proposed caps on debit-card swipe fees may cost the bank $400 million in annual revenue, according to Bloomberg.

Davis reportedly said that the debit-card fee limits combined with other federal regulations-including those that limit interest-rate increases, contract changes, and overdraft and late-payment fees-could cost the bank more than $1 billion a year in revenue.

“That's a pretty big loss of income,” Davis reportedly told conference attendees. He said that U.S. Bancorp may be able to recoup 40 percent of that $1 billion by imposing new fees for checking accounts and other services-but that doesn't spell good news for banking customers.

TCF sued six members of the Federal Reserve's board in October, arguing that the Durbin amendment would cause it to lose significant revenue and is unconstitutional.

But Minnesota's small business owners favor the new debit-card fee limits-and some are going to Washington, D.C., to voice their support and to encourage legislators to enact the new rules this summer.

Among those headed to the nation's capitol are Ted Brausen, owner of Brausen Auto in Roseville and Blaine; Channing Smith, owner of The Corner Store in Inver Grove Heights; and Lance Klatt, executive director of the Minnesota Service Station and Convenience Store Association.

The Minnesota group will join more than 50 small business owners from across the country who back Reform Swipe Fees NOW!, a national campaign headed by the Retail Industry Retailers Association.

“I'm looking forward to talking with our senators and representatives to ask for help in protecting Minnesota's small business and consumers and the commonsense swipe fee reforms as passed by Congress last year,” Klatt said in a statement. “These reforms will really make a difference for folks like our members on Main Street, and so we're counting on members of Congress to stand up to the big banks and make good on the promises that they made last year.”