In a highly anticipated vote, the Senate rejected by 54 to 45 an amendment from Sens. Jon Tester, D-Mont., and Bob Corker, R-Tenn., on Wednesday that would have delayed a swipe fee regulation from Sen. Dick Durbin, D-Ill.
The move decides the fate of a $14 billion a year industry and ends another chapter in the intense lobbying war between retailers and bankers in which millions of dollars have been spent on print, television and radio ads within the Capital Beltway and beyond targeting key member states.
Durbin caught the banking industry by surprise last year when he convinced 64 senators to support adding his measure to the Dodd-Frank financial reform law. It requires the Federal Reserve Board by July 21 to ensure fees banks charge merchants for debit card purchases are “reasonable and proportional.”
The Fed has proposed slashing the charge per transaction to 12 cents from an average of 44 cents but has not issued a final rule.
Tester and Corker had originally proposed a 24-month delay, then shortened it to 15 months and on Tuesday filed an amendment to reduce it to 12 months in a bid to pick up support.
The Tester-Corker measure would require bank regulators to study the impact of the Durbin regulation on consumers and community banks and credit unions for six months. It requires regulators to issue a rule implementing new swipe fee rates six months later but gives them power to include a wider range of costs which could let banks charge more than the Fed is currently proposing.
The issue is a high stakes one for both Tester and Durbin.
Tester is up for reelection in 2012 and has been targeted in attack ads from retailers as defending fat cat bankers but Montana is full of community bankers who argue the Durbin measure could put them out of business.
Durbin meanwhile, as the No. 2 Democrat in the Senate, clearly has his eyes on rising to leader someday and his success with swipe fees last year was seen as one of his biggest legislative victories.
Both sides dug in ahead of the vote and noted the intensity of the lobbying on the issue.
“I would say that leading up to this vote has been one of the most heated debates and exchanges that many of us in the Senate have seen in our time,” Durbin on the floor ahead of the vote.
Tester said regulators needed to ensure consumers and community bankers were not unfairly hurt. “Before the Fed’s new rules are implemented let’s make sure that we have it correct,” he said.