By Avi Salzman
Rep. Barney Frank (D-Mass.), who proudly slapped his name on the Dodd-Frank financial reform law, is now willing to delay implementation of one of the most controversial sections of the law. Frank said he thinks that the rules limiting debit interchange fees should be delayed so that the Fed can study their impact.
Frank’s statement is a positive for the banking industry and card processors like Visa (V) and MasterCard (MA) that could be hurt if the new rules go forward. The Fed was planning to cut the average interchange fee (paid by merchants when consumers swipe their debit cards at stores) to 12 cents per transaction from 44 cents, and was expected to issue a final rule later this month. Merchants have argued that they need relief from being squeezed by the banks into paying high rates, but the rule’s opponents say the government shouldn’t interfere in the market and that banks will have to impose new fees on consumers to cover their costs. Bills have been introduced to delay the rule, and the Fed recently said that it won’t be able to meet its April 21 deadline to issue a final rule.
Delaying the rule could be difficult, because any bill would likely need 60 votes in the Democrat-controlled Senate and would have to be passed over the objection of powerful Senator Richard Durbin (D-Ill.). But Frank’s endorsement of a delay makes it more likely, said one analyst.
“We view the explicit endorsement by Rep. Frank for a delay in Durbin a positive, though there is still uncertainty regarding getting bill passed to delay in the Senate. That said, we continue to believe there will ultimately be a delay and impact less onerous than initially proposed by the Fed,” wrote Evercore Partners analysts Andrew Marquardt in a recent note.