Dive Brief:

• House Financial Services Committee Chairman Jeb Hensarling (R-TX) on Wednesday formally introduced the Financial Choice Act to Congress this week, setting the stage for major gutting of bank reforms and other financial regulations put in place after the financial collapse of 2008.

• Retail trade groups pushed back hard against the measure, arguing that eliminating the Durbin Amendment (the portion of the Dodd-Frank reform act that limits debit card swipe fees) would hurt consumers and retailers, especially smaller businesses.

• The amendment, championed by U.S. Sen. Dick Durbin (D-IL), limits the fees that credit card companies can charge for transactions through retailer point-of-sale systems. The Federal Reserve, the agency regulating the fees, capped them at 24 cents, which retailers have called “significant savings” over unregulated fees, but argue still aren't low enough. 

Dive Insight:

As recently as a year ago, through advocacy on Capitol Hill and through the courts, retailers were working to boost savings by driving banking fees down further. Now they’re in the position of salvaging the very concept of swipe fee regulation.

Hensarling is widely seen as a friend of banks and a foe of post-recession banking reforms, which he has characterized over the years — and in materials accompanying the bill this week — as overly complex regulation and government micromanagement that burden consumers and businesses alike. The Durbin Amendment in particular “is based on the false premise that interchange fees are the result of a monopoly that requires government intervention,” and its mandate is “unworkable, vague, and “unnecessary because there is no monopoly,” according to a summary of the bill released by the committee.

“The mandate is also misguided because it inserts Congress and federal agencies between private parties engaged in a dispute over the contractual amounts that should be paid for services,” according to the summary. “The only branch of government that arguably has a legitimate role to play in this circumstance is the judiciary, which is authorized to resolve contractual disputes between parties based on federal law, precedent, and the particular facts of the case.”

But, to the contrary, the Durbin Amendment has indeed been a “remarkable success,” National Retail Federation Senior Vice President and General Counsel Mallory Duncan said in a statement emailed to Retail Dive. Plus, it’s a law that has been settled for a better part of a decade, she added. 

“It has saved retailers and their customers billions of dollars and it has brought the beginnings of transparency and competition to a market where swipe fees were price-fixed and all banks linked arms to charge the same high fees,” Duncan said. “If reform is repealed, the big banks will go back to those practices, and nothing will stop them from setting these fees as high as they like and driving up prices paid by consumers in the process. … We should be looking at the future of payments rather than trying to re-legislate this important consumer protection and vital step forward for fair market competition.”

The NRF has pointed out that consumers are also in favor of regulating swipe fees, according to research last year conducted for the organization by ORC International: 89% of consumers say the Fed’s swipe fee limits should not be undone, and another 84% say swipe fees should be set on a competitive basis rather than letting the big credit card companies set price-fixed fees charged by most banks. 

Another retail trade organization, the Retail Industry Leaders Association, noted similar research that suggests the House may have some trouble liquidating too many of the post-recession reforms: RILA found that 76% of voters believe that big banks got a bailout while millions of Americans were left to suffer, 63% of Trump voters and 67% of all voters believe that banks are taking advantage of retailers, and 55% of all voters oppose swipe fees of any kind.

Although the House committee launched hearings this week, retailers don’t have a seat at the table. Dozens of retailers are in Washington this week, however, for an organized effort to lobby against repeal, and many attended Wednesday’s hearing. Durbin and Rep. Peter Welch (D-VT) met with retailers Wednesday morning.