Merchant Fee Battle Continues in House

According to one recent comprehensive trade press article, the battle over the merchant fee provisions in the Senate Finance bill is continuing in the House.  The article notes that while small merchants are the public face for merchants, it is really the large merchants that are doing lobbying and will benefit most from the legislation.

The article notes the consequences of one of the bizarre provisions of the bill.  The "reasonableness" requirement for merchant fees will not apply to banks with $10 billion or less in assets, to 99% of the banks in the country.  As the article explains:

"Meanwhile, merchant acquirers are trying to figure out how to make the back-office changes necessary to implement Durbin’s provisions should they become law. The measure would exempt from possible regulation the interchange income of financial-institutions with $10 billion or less in assets—a group Durbin said includes 99% of banks and credit unions. The amendment instructs the Federal Reserve to assess what would be “reasonable and proportional” debit card interchange based on the processing costs incurred. That means there could be one set of interchange rates for a few large debit card issuers and another set for all the others—on top of existing rates based on transaction volume and merchant type."

So the Senate has proposed to regulate the debit card charges of only the largest banks.  It has apparently given no thought to the competitive distortions this would impose on the debit card industry.