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AMENDMENT NO.llll

Calendar No.lll

Purpose: To improve the regulatory structure for electronic debit card transactions, and for other purposes.

IN THE SENATE OF THE UNITED STATES—112th Cong., 1st Sess.

S. 782 To amend the Public Works and Economic Development Act of 1965 to reauthorize that Act, and for other purposes.

Referred to the Committee on llllllllll and ordered to be printed Ordered to lie on the table and to be printed AMENDMENT intended to be proposed by Mr. TESTER (for himself and Mr. CORKER) Viz: 1 2 3 4 5

At the appropriate place, insert the following:

TITLE lll—DEBIT INTERCHANGE FEE REFORM SEC. ll1. SHORT TITLE.

This title may be cited as the ‘‘Debit Interchange Fee

6 Reform Act of 2011’’.

7 8

SEC. ll2. FINDINGS.

Congress finds that—

9

(1) in response to the proposed debit inter-

10

change rule of the Board of Governors of the Fed-

11

eral Reserve System mandated by section 1075 of

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the Dodd-Frank Wall Street Reform and Consumer

2

Protection Act, the Chairman of Board, the Comp-

3

troller of the Currency, the Chairperson of the Fed-

4

eral Deposit Insurance Corporation, and the Chair-

5

man of the National Credit Union Administration

6

Board have publicly raised concerns about the im-

7

pact of the proposed rule;

8

(2) while testifying before the Committee on

9

Banking, Housing, and Urban Affairs of the Senate

10

on February 17, 2011, the Chairman of the Board

11

stated in response to questions about the small bank

12

exemption to the interchange rule, ‘‘there is some

13

risk that the exemption will not be effective and that

14

the interchange fees available through smaller insti-

15

tutions will be reduced to the same extent we would

16

see for larger banks’’;

17

(3) the Acting Comptroller of the Currency, in

18

comments to the Board, cited safety and soundness

19

concerns and stated, ‘‘We believe the proposal takes

20

an unnecessarily narrow approach to recovery of

21

costs that would be allowable under the law and that

22

are recognized and indisputably part of conducting

23

a debit card business. This has long-term safety and

24

soundness consequences for banks of all sizes.’’;

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(4) the Chairperson of the Board of Directors

2

of the Federal Deposit Insurance Corporation stated

3

in comments to the Board regarding the proposed

4

rule their concern that the small bank exemption

5

would not work, stating, ‘‘We are concerned that

6

these institutions may not actually receive the ben-

7

efit of the interchange fee limit exemption explicitly

8

provided by Congress, resulting in a loss of income

9

for community banks and ultimately higher banking

10

costs for their customers.’’;

11

(5) the Chairman of the National Credit Union

12

Administration Board, in comments to the Board,

13

cited concern with making sure there are ‘‘meaning-

14

ful exemptions for smaller card issuers’’; and

15

(6) all of the comments and concerns raised by

16

the banking and credit union regulatory agencies

17

cast serious questions about the practical implemen-

18

tation of section 1075 of the Dodd-Frank Wall

19

Street Reform and Consumer Protection Act, and

20

further study and consideration are needed.

21

SEC. ll3. RULEMAKING AND EFFECTIVE DATES.

22

Section 920 of the Electronic Fund Transfer Act (15

23 U.S.C. 1693o–2), as added by section 1075 of the Dodd24 Frank Wall Street Reform and Consumer Protection Act, 25 is amended—

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(1) in subsection (a)(3)(A), by striking ‘‘9

2

months after the date of enactment of the Consumer

3

Financial Protection Act of 2010’’ and inserting ‘‘12

4

months after the date of enactment of the Debit

5

Interchange Fee Reform Act of 2011’’;

6

(2) in subsection (a)(5)(B)(i), by striking ‘‘9

7

months after the date of enactment of the Consumer

8

Financial Protection Act of 2010’’ and inserting ‘‘12

9

months after the date of enactment of the Debit

10

Interchange Fee Reform Act of 2011’’;

11

(3) in subsection (a)(8)(C), by striking ‘‘9-

12

month period beginning on the date of the enact-

13

ment of the Consumer Financial Protection Act of

14

2010’’ and inserting ‘‘12-month period beginning on

15

the date of enactment of the Debit Interchange Fee

16

Reform Act of 2011’’;

17

(4) in subsection (a)(9), by striking ‘‘at the end

18

of the 12-month period beginning on the date of the

19

enactment of the Consumer Financial Protection Act

20

of 2010’’ and inserting ‘‘a date determined by the

21

Board’’;

22

(5) in subsection (b)(1)(A), by striking ‘‘1-year

23

period beginning on the date of the enactment of the

24

Consumer Financial Protection Act of 2010’’ and in-

25

serting ‘‘12-month period beginning on the date of

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enactment of the Debit Interchange Fee Reform Act

2

of 2011’’; and

3

(6) in subsection (b)(1)(B), by striking ‘‘1-year

4

period beginning on the date of the enactment of the

5

Consumer Financial Protection Act of 2010’’ and in-

6

serting ‘‘12-month period beginning on the date of

7

enactment of the Debit Interchange Fee Reform Act

8

of 2011’’.

9 10

SEC. ll4. STUDY AND REPORT TO CONGRESS.

(a) STUDY REQUIRED.—Not later than 6 months

11 after the date of enactment of this Act, the study agencies 12 shall jointly submit a report to the Committee on Banking, 13 Housing, and Urban Affairs of the Senate and the Com14 mittee on Financial Services of the House of Representa15 tives on the results of a study regarding the impact of 16 regulating debit interchange transaction fees and related 17 issues under section 920 of the Electronic Fund Transfer 18 Act, as added by section 1075 of the Dodd-Frank Wall 19 Street Reform and Consumer Protection Act. 20

(b) SUBJECTS

FOR

REVIEW.—In conducting the

21 study required by this section, the study agencies shall ex22 amine the state of the debit interchange payment system, 23 including the impact of section 920 of the Electronic Fund 24 Transfer Act, as amended by section 1075 of the Dodd25 Frank Wall Street Reform and Consumer Protection Act,

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6 1 and the proposed rule issued by the Board entitled, ‘‘Debit 2 Card Interchange Fees and Routing’’, on consumers, enti3 ties that accept debit cards as payment, all financial insti4 tutions that issue debit cards, including small issuers, and 5 payment card networks, and shall specifically address— 6

(1) all fixed and incremental costs associated

7

with debit card transactions and program operations

8

to card issuers and payment card networks, includ-

9

ing—

10

(A) all direct and indirect costs associated

11

with fraud prevention, detection, and mitiga-

12

tion, including data breach and identity theft,

13

and the overall costs of fraud incurred by debit

14

card issuers and merchants; and

15

(B) financial liability and payment guaran-

16

tees for debit card transactions and associated

17

risks and costs incurred by debit card issuers

18

and merchants;

19

(2) the overall impact of regulating interchange

20 21 22 23 24

fees on consumers, including— (A) the impact on consumer protection, including anti-fraud; (B) the impact on the cost and accessibility of payment accounts and services; and

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(C) the impact on retail prices from

2

changed interchange rates;

3

(3) the effectiveness of the exemptions for small

4

issuers,

5

grams, and reloadable prepaid cards included in sec-

6

tion 920 of the Electronic Fund Transfer Act, in-

7

cluding—

8 9

government-administered

payment

pro-

(A) the impact of market forces on such treatment;

10

(B) in the case of small issuers, the impact

11

on the safety and soundness of those institu-

12

tions and their ability to provide competitive

13

products and services to consumers; and

14

(C) in the case of government-administered

15

payment programs, the impact on entities and

16

individuals that utilize such payment programs

17

and cards; and

18

(4) the impact of routing and exclusivity provi-

19

sions in section 920(b) of the Electronic Fund

20

Transfer Act on all issuers.

21

SEC. ll5. REVISIONS TO RULES.

22

(a) EARLIER RULEMAKING SUSPENDED.—Any regu-

23 lation proposed or prescribed by the Board pursuant to 24 section 920 of the Electronic Fund Transfer Act during 25 the period beginning on the date of enactment of the

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8 1 Dodd-Frank Wall Street Reform and Consumer Protec2 tion Act and ending on the date of completion of the study 3 required under section ll04 shall be suspended by the 4 Board pending the determination required under sub5 section (b) of this section.

6

(b) DETERMINATION.—Upon submission to Congress

7 of the report required by section ll04, the study agen8 cies, through a process coordinated by the Board, shall 9 make a determination of whether— 10

(1) either section 920 of the Electronic Fund

11

Transfer Act, as added by section 1075 of the Dodd-

12

Frank Wall Street Reform and Consumer Protection

13

Act, or the related proposed rule issued by the

14

Board entitled ‘‘Debit Card Interchange Fees and

15

Routing’’ (75 Fed. Reg. 81722 (Dec. 28, 2010)),

16

does not consider all fixed and incremental costs as-

17

sociated with debit card transactions and program

18

operations to card issuers and payment card net-

19

works;

20

(2) debit card consumers may be adversely af-

21

fected by either such section or such proposed rule;

22

or

23

(3) the exemption for small issuers provided by

24

such section or as carried out by such proposed rule

25

may not be effective in practice.

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(c) RULEMAKING.—

2

(1) ISSUANCE OF NEW RULES.—If at least 2 of

3

the study agencies, including the Board, make a

4

finding described in any or all of paragraphs (1),

5

(2), and (3) of subsection (b), then—

6

(A) any regulation proposed or prescribed

7

by the Board pursuant to section 920 of the

8

Electronic Fund Transfer Act during the period

9

beginning on the date of enactment of the

10

Dodd-Frank Wall Street Reform and Consumer

11

Protection Act and ending on the date of com-

12

pletion of the study required under section

13

ll04 shall be withdrawn by the Board and

14

shall have no legal force or effect; and

15

(B) not later than 6 months after the date

16

of submission of the report under section l04,

17

the Board shall issue new rules in final form

18

under section 920 of the Electronic Fund

19

Transfer Act, as added by section 1075 of the

20

Dodd-Frank Wall Street Reform and Consumer

21

Protection Act, based on such findings.

22

(2) CONSIDERATION

OF

COSTS.—In

issuing

23

final rules under this subsection, the Board shall

24

consider all fixed and incremental costs associated

25

with debit card transactions and program operations

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and allow incentives for a more innovative, efficient,

2

and secure payment card network, notwithstanding

3

section 920(a)(4) of the Electronic Fund Transfer

4

Act, as added by section 1075 of the Dodd-Frank

5

Wall Street Reform and Consumer Protection Act.

6

(d) SMALL ISSUER REVIEW.—

7

(1) SMALL ISSUER EXEMPTION REVIEW.—Not

8

later than 2 years after the date of implementation

9

of this Act, and biannually thereafter, the Board

10

shall examine the debit interchange market to deter-

11

mine whether the small issuer exemption under sec-

12

tion 920(a)(6) of the Electronic Fund Transfer Act,

13

as added by section 1075 of the Dodd-Frank Wall

14

Street Reform and Consumer Protection Act, is ef-

15

fective in practice, by examining factors such as—

16

(A) changes in interchange rates offered to

17

small issuers by all payment card networks;

18

(B) changes in fees paid by small issuers

19

to payment card networks, including fees for

20

participation in those networks and other oper-

21

ational and transactional fees;

22

(C) changes and developments by payment

23

card

24

acquirers and processors designed to influence

networks,

merchants,

or

merchant

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the payment method of consumers, including

2

steering; and

3

(D) the impact of routing and exclusivity

4

provisions of section 920(b) of the Electronic

5

Fund Transfers Act on small issuers.

6

(2) REPORT TO CONGRESS.—Upon completion

7

of the review described in paragraph (1), the Board

8

shall submit a report of its findings to the Com-

9

mittee on Banking, Housing, and Urban Affairs of

10

the Senate and the Committee on Financial Services

11

of the House of Representatives regarding the effec-

12

tiveness of the small issuer exemption in practice, in-

13

cluding recommended legislative or regulatory rem-

14

edies for mitigating any harm to small issuers and

15

adequately enforcing the exemption.

16 17

SEC. ll6. DEFINITIONS.

For purposes of this title, the following definitions

18 shall apply: 19

(1) BOARD.—The term ‘‘Board’’ means the

20

Board of Governors of the Federal Reserve System.

21

(2) SMALL ISSUER.—The term ‘‘small issuer’’

22

means any debit card issuer that is a depository in-

23

stitution that, together with its affiliates, has assets

24

of less than $10,000,000,000.

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(3) STUDY AGENCIES.—The term ‘‘study agen-

2

cies’’ means the Board, the Office of the Comptroller

3

of the Currency, the Federal Deposit Insurance Cor-

4

poration, and the National Credit Union Administra-

5

tion.