One seemingly small component of the 2010 federal law aimed at clamping down on abuses by the banking industry survived a challenge this month. But just barely.
The Dodd-Frank financial regulation law was a response to the reckless practices by lenders and investors that led, in large part, to the deep national recession. The big banks and brokerage firms, though, are already working at chipping away at the new rules. Congress must stand firm against them.
Democratic Sen. Jon Tester of Montana and Republican Sen. Bob Corker of Tennessee sought to delay implementation of a rule that would cut the fees banks charge for debit card use. Currently, banks charge retailers 44 cents each time a customer swipes a debit card. Under powers granted by the Dodd-Frank law, the Federal Reserve was ready to enact new rules that would have cut the fees to the 7- to 12-cent range per swipe. According to a Federal Reserve study, each swipe costs banks less than 12 cents.
The rules were set to go into effect next month. Sixty senate votes were needed to approve the delay proposed by Sens. Tester and Corker; the measure got only 54 votes. Maine Sens. Olympia Snowe and Susan Collins voted against the delay.
The fees have hurt retailers as small as convenience stores and as large as national chains. Small stores that sell gasoline, for instance, are especially hurt by the fees. Big businesses also are hurt; the new rule would save Home Depot $35 million a year, its executives said.
Sen. Snowe said she has heard from business owners in Maine who absorb almost $100,000 in such fees annually. Sen. Collins had the same reaction: “I have had numerous conversations with small business owners in Maine who have told me that these fees have become a major cost of doing business.”
Banks with less than $10 billion in assets are exempt from the new, lower fees, so it is clear that the only real losers with the new rule are the large financial institutions. Though this tussle is over, the larger struggle has just begun. There will be more challenges to the new laws that restrain banks and brokerages from playing fast and loose with the economy.
Our elected representatives must make choices in this difficult economic climate, and one is between protecting big businesses and protecting small businesses and consumers. Consumers, especially, need more help from their government. It is they who ultimately bear the cost of debit card fees through higher prices.
It’s not that big businesses should be punished; it’s that choices must be made. Maine’s senators made the right call.