Lawmakers: Repeal rule that spurred bank fees

@CNNMoney October 14, 2011: 5:19 AM ET

WASHINGTON (CNNMoney) -- A few House lawmakers say there's a solution for the debit card fees from Bank of America and others that are ticking off customers: repeal the new regulation that the banks blame for needing the fees.

Several lawmakers announced Wednesday that they will again try to get rid of the provision in the Wall Street reform law that blocked big banks from charging retailers more than 24 cents for processing a swiped debit card. That was a reduction from the previous average of 40 cents.

Banks said the reduced fees from retailers forced them to get funds from somebody else -- in this case, consumers.

Democrats, who pushed the reduced swipe fee when they controlled both houses of Congress last year, have their own solution: on Thursday, a group of Democrats asked the Justice Department to investigate banks for antitrust violations. (House Democrats call for bank fee probe

History doesn't bode well for the repeal effort. A similar bill repealing the swipe fee caps, which had bipartisan support in the Senate, failed in June. Republicans say that new outrage over the bank fees will push this new House effort to succeed.

The Federal Reserve implemented the caps, requiring all the big banks to cut their swipe fees on Oct. 1. That's when banks such as Bank of America (BAC, Fortune 500), Citibank (C, Fortune 500) and Suntrust (STI, Fortune 500) all imposed new fees on customers who use debit card fees.

Bank of America's CEO Brian Moynihan defended the $5 fee last week, saying the bank has a right to make a profit, and that new rules kicking in from Wall Street reforms are costing the bank billions.

"This is a perfect example of the dangers of price controls and the inefficiency of government intervention in the free market," said Rep. Jason Chaffetz, a Utah Republican who filed the repeal measure.

Small banks and credit unions are legally exempt from the caps on swipe fees. But despite benefiting from the blowback with a flurry of new customers who switched from big banks, small banks and credit unions say repealing the swipe fee caps is a top priority.

They say competitive pressures will force them to lower their swipe fees as well --- especially if retailers refuse to accept their debit cards with the higher swipe fees.

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"In just the short period of time since the rule went into effect on Oct. 1, we have seen this amendment reach into the wallets of average Americans through increasing bank fees, just as we had feared," said Dan Berger, chief lobbyist for the National Association of Federal Credit Unions. "This is a great first step in the process of correcting this Draconian bill."

One Washington policy analyst said he doesn't expect new Congressional efforts -- from either side of the aisle -- to go anywhere.

"We do not think these bills are going anywhere and we advise investors to ignore what we think is merely political noise," said Brian Gardner with investment firm Keefe, Bruyette & Woods, in a note Thursday to financial investors. To top of page

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