Opponents of a U.S. government crackdown on debit card processing fees called for delaying its implementation on Tuesday, with one top MasterCard executive equating the proposal with creeping socialism.
At a lively round-table event sponsored by PYMNTS.com, representatives of credit card companies and small banks duked it out with retail and consumer advocates who support pending rules that would greatly limit how much money banks can charge merchants for debit card transactions.
Banks and debit card networks like MasterCard Inc and Visa Inc are fighting against a proposal by the Federal Reserve that would cost them billions in revenue, by restricting them from charging more than 12 cents per debit transaction -- a 75 percent decrease from the average amount charged in 2009.
Bank of America Corp, the largest U.S. bank, has said the cap could cost it as much as $2.3 billion in fee revenues annually. At the Fed's proposed level, the cap would cost banks about $13 billion in revenue, said CardHub.com.
The debit interchange fee rules were in included in the Dodd-Frank Wall Street reform law at the initiative of Senator Richard Durbin, an Illinois Democrat. Opponents are hoping that legislation recently introduced by a bipartisan group of senators to slow down and study the issue will be enacted before the Fed finalizes its rules by April.
Banks and debit card networks say that cutting debit cards fees drastically will only force banks to charge more for other products. Chris McWilton, MasterCard's president of U.S. markets, said some banks have already taken such steps to protect themselves ahead of the new reforms.
In a free market system, businesses are going to do what they need to do to protect the economics that they built their business on. That is the free enterprise system. It's America. It's apple pie, said McWilton. Creeping socialism is going in and saying we are going to set the price.
The proposal targets primarily large banks like Bank of America Corp and Wells Fargo & Co, and exempts banks with less than $10 billion in assets. But smaller banks argue the exemptions will not work because there is nothing to stop card networks from forcing them to comply with the fee limit.
My bank is road kill, said John Buhrmaster, the president of 1st National Bank of Scotia, of Scotia, New York.
McWilton and Buhrmaster both backed the recent call by a bipartisan group of senators to delay the Fed's rules until a study can be completed.
But supporters of the Fed's plan said the study is just another way to stall much-needed reforms.
This is an area that has been studied frankly to death, said Mallory Duncan, a senior vice president of the National Retail Federation. At some point, enough is enough.
While large banks are primarily targeted by the rules, they have kept a fairly low profile on the public debate, leaving the credit card companies and smaller banks to do the day-to-day lobbying, despite the small-bank exemption.
That was supposed to change on Tuesday with a planned appearance by Pamela Joseph, who runs US Bancorp's payments unit. She would have been one of the first executives from a top U.S. bank to debate the debit card fee caps in Washington.
But when the panel began, it was announced she could not attend. Former Bank of America employee Margaret Weichert, now a managing director with consultancy firm Market Platform Dynamics, sat in her place.
A US Bancorp spokeswoman did not respond to inquiries about her absence. But McWilton said he had spoken with Joseph, who told him she could not make it because of a customer conference.
McWilton said that big banks are being vocal on the issue, but just not in ways that are as visible to the press.
They have taken a black eye because of some of the things that went on in the credit-card industry, he said.
(Additional reporting by Maria Aspan; Editing by Steve Orlofsky)