The Senate rejected legislation Wednesday that would have halted pending federal regulations to limit the debit card swipe fees that financial institutions charge retailers, in a narrow vote that rekindled populist fervor against Wall Street.
The 54-45 vote did not split along typical partisan lines. Instead it pit one populist Democrat, Sen. Richard Durbin of Illinois, against another, Sen. Jon Tester of Montana, as both claimed to be fighting to protect consumers and small banks from fees that totaled $16 billion in 2009.
Sixty votes were needed for passage of the legislation that was sought as an amendment to a broader economic development bill making its way slowly through the Senate.
The new swipe fee regulation, approved as part of last year's Wall Street overhaul law, goes into effect next month. It would cap debit card swipe fees to 12 cents per transaction. Fees now average 44 cents.
Retailers largely support the new regulation, but the big banks and credit card companies have mostly opposed capping the amount they can collect on debit card transactions, which now exceed any other form of noncash payments.
Tester proposed delaying the new law to study its effect on smaller financial institutions and credit unions, particularly those in Montana where he is up for reelection next year. Smaller entities fear being unable to recoup the costs of handling transactions or having their cards shunned by retailers.
Durbin defended the legislation he drafted as part of the Dodd-Frank financial reform law last year and said institutions with less than $10 billion in combined assets would be exempt and able to continue collecting the higher swipe fees.
A highly charged debate unfolded this week on the Senate floor and at home. Tester faces a potentially difficult reelection next year in Montana, where ads are running on both sides of the issue – from the small banks that support him and the national retailers whose radio ads say, "Tester lets the big banks swipe our money."
The broader economic development bill faces an uneven climb in the Senate and resistance from conservatives.