Senate votes to hold down debit card fees

Merchants triumphed over bankers in a battle for billions Wednesday as the Senate voted to let the Federal Reserve curb the fees that stores pay financial institutions when a customer swipes a debit card.

Under the legislation, the Fed would be allowed to issue final rules on July 21 trimming the average 44 cents that banks charge for each debit card transaction. That fee, typically 1 to 2 percent of each purchase, produces $16 billion in annual revenue for banks and credit card companies, the Fed estimates.

The central bank has proposed capping the so-called interchange fee at 12 cents, though the final plan could change slightly.

The Consumer Federation of America said it was concerned about how customers would be affected by the change.

Travis B. Plunkett, the consumer federation's legislative director, said the amount of savings that stores pass on to consumers would depend on how competitive their markets are. He said he also worried that the Fed's current proposal might be too restrictive, which might tempt banks to "use that as an excuse to increase charges on customers they value the least, low- to moderate-income customers."

In Wednesday's vote, senators trying to thwart the Fed's rules needed 60 votes to prevail but fell six votes short, 54-45.

That delivered a victory for Sen. Richard Durbin (D-Ill.), who put the provision into last year's financial overhaul law requiring the Fed's action.

In a speech before the Senate that was broadcast on C-SPAN2, Durbin pointed out that Americans pay some of the highest fees in the world. In Canada, he said, there is no fee for debit card use.