[Congressional Record Volume 157, Number 164 (Monday, October 31, 2011)]
[Senate]
[Pages S6903-S6904]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            SWIPE FEE REFORM

  Mr. DURBIN. Mr. President, we are at a significant moment in the 
relationship between the banking industry on Wall Street and businesses 
and consumers on Main Street all across America. This could be, in the 
words of Malcolm Gladwell, a ``tipping point,'' and it could lead to a 
much more balanced relationship in the future.
  It is interesting how we reached this point. There was a time not 
that long ago when Wall Street and Main Street both played by the same 
rules. Banks and businesses sold goods and services to consumers in a 
competitive market environment with transparent prices. Banks performed 
and still perform a valuable function in our economy, providing capital 
and liquidity. Businesses, of course, in the sale of goods and services 
are generating the activity that fuels our economy. They were 
complementary. They worked with one another.
  The successful banks and businesses were the ones that were more 
efficient than their competitors. They offered better products, better 
prices. This system, characterized by transparency, competition, and 
choice worked well for everyone: consumers, banks, businesses, all 
their customers. It was the basis for a free market economy and a great 
nation.
  In recent years, and particularly after the repeal of Glass-Steagall, 
though, things changed. Banks started moving to a new role beyond 
capital and liquidity. The level of profitability and the activities of 
the banks started moving in many different directions. Instead of 
practicing transparency and competition, many banks started cutting 
corners, imposing fees, raising interest rates, and basically creating 
policies that were very difficult for even their most loyal customers 
to follow. That was a situation which had gotten out of hand.
  We saw hidden fees pop up left and right, such as overdraft fees on 
checking accounts that went completely beyond any reasonable penalty 
for a person who is guilty of that conduct, and sudden interest rate 
changes on credit cards. Consumers many times did not even know they 
were being charged the fees until it was too late, and the banks 
figured if all the banks did it consumers would have no choice. They 
had to live with it.
  Perhaps no fee better characterized the absence of transparency and 
competition than the interchange fee, or the swipe fee. This is a fee 
that banks receive from merchants and retailers each time a person uses 
a debit card or a credit card. It is a fee unlike any other. With most 
fees we see one fee rate charged by one bank, such as Bank of America, 
another rate by another bank, Wells Fargo or Chase or whatever it 
happens to be. But with interchange fees, all banks receive the same 
fee rate. There is no competition.
  The banks realized that competition holds fee rates down. So they 
went to Visa and MasterCard--and on debit cards Visa has around 80 
percent of the debit card business--and said to them: You can set, you 
can dictate the interchange fees the banks will collect. And they did.
  This duopoly, these two major credit card giants, Visa and 
MasterCard, set fees for all of the banks issuing their cards across 
America. This has been a huge moneymaker for the banks. Banks make an 
estimated $50 billion a year in debit and credit card interchange fees, 
and because there is no competition and no negotiation with the 
retailers Visa and MasterCard reward their big bank allies with higher 
fee rates every single year, even as the cost of processing these 
transactions continues to go down.
  Swipe fees have become a huge and growing burden for Main Street 
businesses and customers, and American families ultimately pay the 
price in the form of higher costs for groceries and gasoline.
  I think of Potash Supermarket. I have talked about it on the Senate 
floor many times. Art Potash has become a buddy of mine, second or 
third generation owning this supermarket near North Chicago. He is not 
as big as the big boys, Dominicks, Jewel, and the others, but, boy, 
what a nice store he has.
  Art came to me years ago and said: They are killing me. The debit 
card sweep fees are killing me. It is the second or third most 
expensive item when I put together the cost of my business, and it is 
out of control. I have no control over it.
  Art was one of the people, he and Rich Neimann down at Quincy, IL, 
retailers, businessmen who got me started on this. Well, it is 
interesting. Something is happening out there in America. It could be 
that the era of some of these banking practices is coming to an end. 
Maybe we are reaching a tipping point.
  In 2009, Congress passed credit card reform that reined in sudden 
interest rate changes, and regulators placed curbs on abusive overdraft 
fees. Of course, the credit card companies and the banks screamed 
bloody murder: Too much government. Too much regulation.
  We did not listen to them. We listened to American families and 
consumers. Last year, Congress passed a Wall Street reform bill, and we 
created a new Consumer Financial Protection Bureau and placed 
reasonable limits on Visa and MasterCard swipe fee price fixing. No 
surprise. The banks cried bloody murder. They do not want to make a 
penny less than they made in the last quarter, even if their past 
profits were inflated by hidden fees and anticompetitive practices.
  So now big banks are looking for new ways to squeeze their customers 
in order to maintain their record profits and ten-figure executive 
bonuses. But in the past week, something interesting has happened in 
America. After years of raising fees on the customers without much 
resistance, several of the biggest banks tried to stick it to their 
customers again with a new monthly debit card fee. The consumers of 
America noticed, stood up, and said: No way.
  After Bank of America, Wells Fargo, and several other big banks 
announced these new debit fees, their customers began voting with their 
feet. New account openings at credit unions and community banks surged 
in many cases by 20 to 50 percent.
  I am sure that is good news to my colleague from Iowa to know that 
there is more business at the community banks and credit unions of 
Iowa, leaving the Wall Street banks and coming home to Iowa. It is good 
news in Illinois.
  Consumers have been emboldened. They are now saying they will only do 
business with banks that care about serving them instead of squeezing 
them. This has been a great development for consumers. It has also been 
great for those small banks and credit unions which we value so much in 
the Midwest who have never stopped playing by the rules and have always 
valued their customers and their communities.
  Now, November 5 is coming. It turns out to be a day I was not 
previously

[[Page S6904]]

aware of but I have read about now. They are calling it the National 
Bank Transfer Day. We are seeing many big banks actually reversing 
themselves and abandoning their recently announced debit fees in light 
of the possibility that even more people are going to shift away from 
the big banks with the monthly debit card fees to community banks and 
credit unions and other banks that are not imposing the fees.
  Big banks are starting to see it just is not good business to nickel 
and dime their customers and charge them five bucks a month for access 
to their own checking account. That is what they were doing. At least 
that is what they were proposing.
  Can you imagine the big banks ever changing course like this a few 
years ago? Not a chance. But through reasonable regulation and 
consumers standing up and being alert, we are restoring transparency 
and competition to financial services.
  Transparency and competition are part of a good, functioning, free 
market economy. It is not over by a long shot. The big banks still have 
enormous power and resources. They are going to continue to try to find 
ways to make money at the expense of their customers, and that is why 
we need to do several things.
  First, we need to confirm once and for all a Director for the 
Consumer Financial Protection Bureau. I know Wall Street banks and 
financial institutions and many on the other side of the aisle hate 
this new Bureau, as Dale Bumpers used to say, like the Devil hates holy 
water. But the fact is, this is an agency solely dedicated to ensuring 
that consumers have good information so they can make good choices. 
Senate Republicans should lift their hold on Richard Cordray so he can 
be confirmed to run this important agency. They should stop doing the 
bidding of the financial institutions who are afraid of oversight and 
stand on the side of families and small businesses across America.

  Second, we need to ensure transparency of all bank fees so consumers 
cannot be tricked and trapped. This is the role the CFPB will 
eventually play. But there is no need for banks to wait to provide this 
transparency. For example, the Pew Charitable Trusts has developed an 
easy-to-read, one-page model disclosure for banks to list all of the 
fees they can charge on checking accounts. Banks should immediately 
adopt this Pew Trust disclosure box so their Web sites are clear to 
consumers and consumers can actually comparison shop and choose the 
bank that best serves their needs. This type of standardized fee 
transparency will help drive consumer business to the good banks, those 
that play by the rules and offer a good value at a reasonable price.
  Third, we have more work to do to bring transparency and competition 
to the swipe fee system. For example, credit card swipe fees are still 
entirely unregulated, and they can cost a merchant up to 3 to 4 percent 
of the transaction amount. Every American should be aware of what it 
costs a merchant to accept a credit card because ultimately the 
consumers pay for it.
  Consumers should particularly be aware of how much their local small 
businesses pay in credit card interchange. They should also know how 
much more rewards cards cost merchants than nonrewards cards. This will 
help consumers make more informed choices.
  If we are for competition and for transparency and for choice, we 
have to move to a level where consumers have more information. So I 
call on the Nation's biggest 1 percent of banks, those with over $10 
billion in assets, to disclose in their monthly statements of their 
cardholders the interchange fees the banks received on each credit card 
transaction.
  While it would be ideal for this interchange disclosure to be made 
known to customers directly at the cash register or on receipts, I 
recognize that might be difficult. So let's do it on the monthly 
statement. Big banks can easily modify these monthly statements to show 
how much the bank received in interchange fees on each transaction. 
This can happen almost immediately.
  This type of transparency is particularly important because we are 
seeing big banks trying to steer their customers away from paying with 
debit and toward credit. Have you noticed the ads that are offering 
rebates on credit cards now; 1 percent, 2 percent, even 3 percent on 
gasoline? What customers may not realize is that the fee being charged 
by the credit card company and the bank to the gas station may be far 
in excess of 3 percent. So they have already taken the money away from 
consumers as they pay for their gas, and then they toss three pennies 
back to them.
  It is time for a little more disclosure about the actual relationship 
between those banks, credit card companies, and the consumers and 
retailers that deal with them.
  In closing, I do believe we are at a tipping point when it comes to 
the balance between Wall Street and Main Street. For too long Main 
Street businesses and consumers have been playing by the rules, and 
Wall Street has been rigging the game. Now transparency and competition 
are being restored to the banking industry.
  A member of my staff was down in Georgia over the weekend. He drove 
by and saw a little bank called Bank of the Ozarks. I do not know what 
it was doing in Georgia, but it said Bank of the Ozarks. It had a sign 
outside that said: We agree. Debit cards should be free.
  The word is spreading across America. It is an important word to 
which consumers are paying attention. We are seeing dramatic increases 
in the Web sites of credit unions and community banks, people 
transferring their money to where they think they will get better 
treatment and a better deal. It is called competition. Transparency and 
competition are coming to the banking industry. Consumers are getting 
better information, and many of them are making important choices for 
their families and businesses.
  This is going to strengthen small banks and credit unions in Iowa, in 
Illinois and Connecticut, and many places all around America. It will 
help small businesses in Iowa, too, as well as Illinois, who are being 
crushed by hidden swipe fees today. It is going to help the economy 
move forward in a fair way with real disclosure.
  Let's keep this progress moving. I salute those who stood with me on 
a bipartisan vote on both occasions on the Senate floor to move forward 
on this important matter. Just a few weeks ago, major publications such 
as the Wall Street Journal and the Chicago Tribune were jumping all 
over the ``Durbin fee,'' and they were standing by the big banks that 
said they were going to put this monthly fee on because of Durbin.
  Guess what. Those banks are backing off now. They realize their 
customers are leaving if they are not treated properly and fairly. 
Let's continue that. It is healthy for America and the growth of our 
economy.
  I yield the floor. I note the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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