Dow Jones Newswires-Wall Street Journal | The Senate, voting
64-33, moved to curtail the “swipe fees” that financial companies
impose on debit transactions, underscoring the increasingly populist
tint of pending legislation that would overhaul regulation of the
financial-services sector.

Under the amendment offered by Sen. Dick Durbin to businesses by
financial firms on debit cards, and empower merchants to offer
discounts to customers if they pay with cash, check or a debit card.

The amendment’s backers say the fees imposed on debits are higher than the actual cost of processing those transactions, and annually generate billions of dollars in costs that are eventually passed on to consumers. Durbin said the financial companies are imposing “outrageous” fees on merchants and retailers.

“In a time of recession, when we need small businesses to step up and create jobs, this is a way to move forward,” he said.

Under Durbin’s proposal, banks and credit unions with $10 billion or less in assets would be exempt from the new limits. Even with the exemption, Durbin said his proposal would cover 65 percent of debit transactions.

The amendment’s potential cost to the banking industry is unclear, as the Fed would have to determine what “reasonable and proportional” fees the banks should be allowed to charge merchants for using their cards.

Still, the amendment represents a potential hit to financial companies, and the proposal was opposed by the industry, including groups representing smaller banks and credit unions.

Dan Berger, a lobbyist for the National Association of Federal Credit Unions, warned the proposal would hurt credit unions and small banks, and wouldn’t help consumers. “This will do nothing for consumers but go straight to the bottom line of the big box stores and giant retailers,” he said.

Merchant groups, who have pushed lawmakers to review the fees they incur for debit cards, were vocal in their support of the Durbin amendment.

The provision wasn’t in the financial regulation bill that passed the House of Representatives in December, and the issue is likely to be hotly debated in coming congressional negotiations over the final regulatory overhaul bill. Senate Democratic leaders hope to pursue next week final passage of the broader bill, designed to address the causes of the financial crisis.