WASHINGTON — Striking at a lucrative bank business, the Senate on Thursday voted to force credit card companies to reduce fees for debit card transactions and permit merchants to offer customer discounts based on their payment method.
The 64-33 vote inserted the fee requirement in a package of new financial rules the Senate is considering to ward off a repeat of the financial crisis.
The vote was a major defeat for banks, which lobbied hard against it. But the measure attracted heavy bipartisan support and surpassed a 60-vote threshold for passage. Seventeen Republicans voted for the amendment; 10 Democrats voted against it.
The measure from Sen. Richard Durbin, D-Ill., would force credit card companies to charge businesses less for debit card transactions than for credit card payments.
Under current practice, a business that accepts major credit cards signs agreements with the card companies to pay a percentage of each transaction, usually about 2 percent to 3 percent. But credit card charges cost more to process than swipes with a debit card.
The measure still needs to survive negotiations with the House, which has already passed its version of regulations on Wall Street. The House bill does not contain the debit card provision.
The change could represent the most direct and tangible consumer benefit of the regulatory overhaul and would amount to a triumph for Durbin, who failed to get a similar proposal attached to an overhaul of credit card regulations last year.
“Left alone, this is going to get worse for small businesses that face higher fees, for consumers who face higher prices, and for everyone but banks and credit card networks,” Durbin said before the vote.
The Electronic Payments Coalition, an industry group whose members include Visa, MasterCard and American Express, said the Durbin plan would harm many small banks and credit unions that already lose money or barely break even in their card operations.
The credit card companies said the change would force consumers to pay more for their cards and result in higher profits to large retailers. MasterCard argued that similar regulations in Australia did not result in savings to retail customers.
“This amendment helps big merchants, but consumers will pay the price,” MasterCard said.
The debit card issue pitted the politically popular appeals of small business owners against the influence of community banks and the lobbying power of the credit card companies.
Durbin wants the Federal Reserve to ensure the fees that credit card companies charge for debit card use are proportional to the costs of processing the transaction.
Durbin’s measure requires that once merchants can pay lower fees for debit card purchases, they then would be able to offer discounts to their customers based on their method of payment. Merchants would be prohibited from placing minimum purchase requirements for the use of a debit card.
Retail groups said that any reductions in fees would be passed on to consumers.
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