From time to time, we take a break from reviewing credit card offers and focus on breaking news in the collective credit card industry. From the new regulations in the Credit Card Act of 2009 to widespread changes that may or may not take place, it’s our belief the more aware we are, the better consumers we are. Today’s startling announcements from both the FDIC and Federal Reserve is sure to cause more than a few raised eyebrows – and ultimately, more than a few raised fees.
Ben Bernanke, Federal Reserve Chairman and Sheila Bair, chairwoman for the Federal Deposit Insurance Corporation (FDIC) both said on Thursday that the new restrictions on debit and credit card fees might be “unworkable” for smaller banks and credit unions. These new restrictions would significantly reduce those pesky ATM withdrawal fees we’re charged anytime we take cash out using a credit or debit card.
During this same meeting, however, Bair and Bernanke also said they had no intentions of halting the July 21 effective date and that implementation would move forward, regardless. Bair also said she felt as though bank failures wouldn’t occur as a result of the new compliance regulations.
As with many financial products, there exists a certain political angle and this was no different. At least two senators, including Senator Jon Tester, a Montana Democrat, appear to have personal stakes in how this ultimately plays out. Senator Tester is sponsoring a new bill that would delay this aspect of the 2009 CARD Act. He wants a two year transition period to go into effect so that smaller banks, credit unions and even credit card companies can better prepare. But here’s where things become a bit…muddled.
The nation’s largest retailers continue to support the bill and are encouraging both FDIC and the Fed to not get sidetracked in their efforts. In arguments today, it was learned American merchants pay higher swipe fees than any other country. Anytime we go to Wal Mart, Target or any other retailer, and we use our credit cards, the merchant pays several cents in swipe fees. And before you think to yourself that they’re getting the bad end of the stick, you should know they pass those fees on to their customers. Wondering just how much money’s at stake on an annual basis? There is $16 billion on the line in swipe fees.
The interesting aspect of this is that President Obama’s approved law specifically states banks with assets of less than $10 billion are exempt from these guidelines. Now, though, Bernanke is saying it’s giving an unfair advantage to these smaller entities. The legalities of the exemption were argued this week, with nothing being resolved.
The Credit Card Companies
While no one is quite sure how Chairwoman Bair believes this is possible, she did suggest that the big credit card companies, including American Express, Discover, MasterCard and Visa, could allow smaller banks to charge higher swipe fees. Visa expressed its intent months ago when it saw the difficulties that were mounting. It says it will “adopt such a two tiered pricing plan…regardless of what the Fed dictates.”
Frankly, despite all of the bickering and accusations that our politicians so quickly allow themselves to stoop to these days, it appears at least one of the big game players in the credit card industry has found the acceptable mid-road. It’s just a shame that the politicians, who are elected to ensure their constituents’ voices are heard are too interested in their own ulterior motives. Senator Tester has been “furiously raising money from Wall Street ahead of his 2012 re-election campaign”, according to the Huffington Post.
Information is Not the Problem
According to Bernanke, it’s not a lack of information anyone is complaining about, “that’s not the problem”; it’s the ultimate solution that he says he’s most concerned with. One lawyer with the Merchants Payments Coalition, Doug Kantor said it best, “Merchant groups from around the country have written to Congress demonstrating that the small bank exemption will work.” It doesn’t appear Congress is interested in a “win-win” solution.
The question then becomes, what do each of us, as American consumers, believe is acceptable and if there isn’t an acceptable solution that is ultimately reached, is it enough that we will once again rethink our spending habits? Remember, regardless of what happens, these fees, whether they’re in the beginning of a transaction or show up as various fees on our monthly statements, will be paid by the card holder.