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U.S. Sen. Jon Tester, D-Mont., self-proclaimed defender of the little guy and rural America, has sided with the banking industry on the issue of debit-card “swipe fees” – and the owners of convenience stores and other retailers aren’t happy with him.

“I personally think the senator has made a big mistake by taking this side,” says Ronna Alexander of the Montana Petroleum Marketers and Convenience Store Association, which supports a proposed limit on fees that merchants pay to banks and credit card companies when customers use a debit card. “(His bill) essentially kills it.”

Tester introduced a bill March 15 to delay implementation of the swipe-fee limit for two years, so the Federal Reserve and other federal financial agencies can study its impacts. It awaits action in committee.

The limit, set to take effect in July, says banks with more than $10 billion in assets cannot charge merchants more than 12 cents per transaction involving a debit card. Merchants say the cost to the bank of processing the transaction is about 4 cents.

In 2009, the per-transaction fees averaged 44 cents. The Federal Reserve says banks and credit card companies took in nearly $16 billion that year in these fees.

Most of Montana’s banks would be exempt from the limit, because they have less than $10 billion in assets. But Montana banking groups still oppose the limit, arguing it would affect smaller banks anyway, because they’d have to lower their fees to compete with the larger multistate banks.

“Those below may be held to a different standard, but in the marketplace, the impact will still be just as damaging for small banks,” says Steve Yeakel, executive director of the Montana Independent Bankers. “The concern is that we’ll end up losing market share.”

That concern, says Tester, is why he’s sponsoring the bill – and has voted against the swipe-fee limit from the beginning.

Montana’s community banks and credit unions will be forced to start charging lower fees or quit offering debit cards, make up the revenue loss by increasing fees on things like checking accounts, and risk losing customers, he says.

“When they quit offering a debit card, (you as a customer) would go to a bigger bank,” Tester says. “You’re going to move everything with it, because that’s what you do as a business.

“I’m doing this because (the limit) is the wrong thing to do for rural America.”

Tester points out that if his bill passes and Congress does nothing after the two-year study, the limit still takes effect.

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U.S. Rep. Denny Rehberg, R-Mont., who’s challenging Tester for Senate in 2012, says he hasn’t taken a position on the issue.

However, the Montana Republican Party last month blasted Tester for the legislation and said he’d reaped tens of thousands of dollars in campaign contributions from the banking industry because of it.

Tester acknowledged that his bill might have led to some campaign contributions, but “that’s not why this was done at all,” and that his position shows that he’s looking out for rural banks.

Convenience store owners and other merchants aren’t convinced, and say allowing banks to charge exorbitant swipe fees is taking the money from the pockets of consumers.

“There is no way (the merchants) won’t pass their savings on to the consumer, because you’re always fighting for a step up on the competition,” Alexander says.

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