Congress ends effort to kill limits on debit card fees

Banks were regrouping on Thursday, a day after being handed a large defeat in the U.S. House, where Republicans sided with retailers in agreeing to preserve limits on debit card fees.

The financial industry insisted it was not done fighting to remove limits on the fees. Retailers were already looking to carry the fight to credit card fees.

"We are glad this fight is over, and are happy with our victory," said Austen Jensen with the Retail Industry Leaders Association. "The banks should clearly know that this is over with."

"This debate is not over," said Rob Nichols, president and CEO of the American Bankers Association.

The House had been considering a broad financial reform bill that included a repeal of the Durbin amendment, which established the limits on debit card fees. The limits were backed by Senator Dick Durbin of Illinois when the Dodd-Frank financial reform law was enacted in 2010.

The effort to remove the card fee limits had drawn strong opposition in the House. Representative Jeb Hensarling, the bill's author, announced Wednesday he would end the effort to eliminate the Durbin amendment because he did not want to see his entire finance bill upended.

"I’ve said before that repeal of the Durbin amendment was the most contentious part of the bill among Republicans," he said in a statement. "We won’t let this one provision hinder passage of an important priority bill."

The full House is expected to vote on Hensarling's bill in the coming weeks, but there is enough opposition in the Senate that it will probably not become law.

The feud over government caps on the fees retailers pay when accepting debit cards has run red hot ever since the limits were imposed. With billions of dollars in revenue at stake, banks and retailers have battled nearly constantly in Washington.

Retailers have argued the cap is critical to control sky-high costs imposed by a handful of card servicers, while banks insist the limit represents government meddling in private industry.

Nichols said limiting debit card fees was "wrong and Congress should fix it."

Under Dodd-Frank, the Federal Reserve was ordered to set limits on how much Visa and Mastercard could charge for processing debit card transactions. The end result nearly halved fees received by banks, dropping the cost of a debit card transaction from an average of 45 cents to an average of 24 cents.

(Reporting by Pete Schroeder; Editing by David Gregorio)