A Dodd-Frank Fight With Billions at Stake Spurs GOP Friction

(Bloomberg) -- Republicans' latest effort to kill a Dodd-Frank provision that has cost banks billions of dollars is running into trouble.

At issue is part of the 2010 law that limits how much money banks can collect from retailers when consumers use their debit cards. House Financial Services Committee Chairman Jeb Hensarling wants to get rid of the fee cap now that Republicans control Congress and the White House.

But he's facing resistance from other GOP lawmakers who either don't agree with him or don't want to pick sides in a high-stakes fight between corporate titans. Banks such as JPMorgan Chase & Co. have argued for years that it's not the government's role to set charges. Retailers such as Wal-Mart Stores Inc. counter that lower transaction fees lead to lower prices.

The fight is coming to a head with the financial services panel set to vote on a Hensarling bill next week that would overhaul much of the Dodd-Frank Act. While Republicans are eager to start the process of rolling back post-crisis financial rules, some aren't thrilled that Hensarling's legislation would overturn the cap on card fees.

‘Most Contentious'

The issue is “probably the single most contentious portion of the bill,” Hensarling, a Texas Republican, told reporters on Thursday. “There is wholesale enthusiasm on our side of the aisle for pretty much every other aspect.”

The so-called swipe fees, also known as interchange fees, are set by Visa Inc. and Mastercard Inc., but most of the money goes to banks. The limit on debit card fees, known as the Durbin amendment because Illinois Senator Dick Durbin inserted it in Dodd-Frank, has cost lenders an estimated $9 billion in revenue, according to analysts at Goldman Sachs Group Inc.

And while other aspects of Dodd-Frank often get more attention -- such as the Volcker Rule restriction on banks' trading -- card fees have probably drawn the most aggressive lobbying by lenders. Retailers also have spent millions to keep the fee cap intact. Stuck in the middle are politicians who would prefer cordial relations, and campaign contributions, from both industries.

Now, it's up to Hensarling to decide whether to remove the repeal of Durbin from his bill, cut a deal with Republicans who support the swipe-fee cap, or risk forcing lawmakers to vote on the issue. Individual Republicans might have to show where they stand if an amendment is offered when Hensarling's committee votes on his legislation or when the entire House of Representatives takes it up later on.

A Longshot

It remains a longshot that the politically-divided Congress will approve any major financial services legislation, because most bills require 60 votes to pass the Senate. But if banks fail to get a repeal of the Durbin amendment through the House, it would mark a major setback.

U.S. Representative Dennis Ross from Florida is among Republicans who support the debit-fee cap and want its repeal removed from Hensarling's bill.

“I'm not sure what the end game is for the chairman yet, we're still working through it," Ross, who's a member of the Financial Services panel, said in an interview. “I'm not alone in my concern. It may be that this Durbin amendment when it gets to the floor, maybe it will bog down the bill."

Hensarling said he's confident his plan to overhaul Dodd-Frank, known as the Financial Choice Act, will prevail regardless of how lawmakers resolve the debate over swipe fees.

Warren Testimony

House Speaker Paul Ryan of Wisconsin said this week that he will seek a vote on the Choice Act “as quickly as possible” once it gets through Hensarling's committee.

Democrats have labeled Hensarling's bill a gift to banks, and expressed their opposition at a Friday hearing. Senator Elizabeth Warren, the Massachusetts Democrat who is one of Wall Street's most relentless critics, testified, calling the GOP legislation a "589-page insult to working families" that would only make "big-time" lobbyists happy. Only two Republican lawmakers were present when the hearing started.

To contact the reporter on this story: Elizabeth Dexheimer in Washington at edexheimer@bloomberg.net.

To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Justin Blum