House Democrats Thursday called on the Justice Department to investigate whether large banks are coordinating new fees in violation of antitrust laws.
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Representative Peter Welch said public statements by big banks and trade groups raise questions about whether financial firms have colluded on fee increases to make up for revenues lost because of a new cap on debit card swipe fees.
The letter is the latest battle over the Durbin amendment, which went into effect on Oct. 1 and cut by nearly half the amount banks can charge merchants when customers swipe their debit cards.
The amendment has been a boon to retailers and an aggravation for the banks who stand to lose billions of dollars in annual revenues.
Welch and other Democrats sent a letter to U.S. Attorney General Eric Holder that outlined examples of the American Bankers Association, the Independent Community Bankers Association and other trade groups saying new fees are inevitable.
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``We are concerned that communications between banks and bank associations that may amount to price signaling or collusion have occurred in the wake of Congressional action to reform debit card swipe fees,'' the letter said.
Justice Department spokeswoman Gina Talamona said the agency received the letter and will respond as appropriate.
JPMorgan Chase and Bank of America declined to comment. A Wells Fargo representative was adamant the company's fee decisions were independent.
``We are trying to cover the cost of providing debit card services,'' said Lisa Westermann, a spokeswoman for the bank.
Bank of America's new fees on debit card use begin early next year, while JPMorgan Chase's pilot is already in effect. Wells Fargo's pilot begins Friday.
Senator Dick Durbin and other Democrats who supported the swipe fee limits have been quick to slam the banks for introducing new charges. But the financial industry has said lawmakers were aware the fee limits were a gift to retailers and potentially harmful to consumers.
``It's ironic that Congressman Welch and some members of Congress continue to feign surprise and outrage at the consequences of an amendment that they themselves advocated at the behest of giant retail,'' said Trish Wexler, spokeswoman for the Electronic Payments Coalition, which is made up of banks and credit card companies.
MF Global policy analyst Jaret Seiberg expressed skepticism about the charges, drawing a distinction between collusion, which is illegal, and successive fee changes by companies -- a practice he says is common.
``It seems highly unlikely that bankers would (collude) when they know the political spotlight is shining all over this issue,'' he said.
PUSH FROM BOTH SIDES
The pressure from Democrats comes as other House lawmakers try to repeal the Durbin amendment.
Republican Jason Chaffetz and Democrat Bill Owens introduced legislation Wednesday to repeal the swipe fee rule, calling it a form of price control that harms both consumers and the banking industry.
``These legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue,'' Chaffetz said in a statement.
Some market watchers see the issue as a distraction.
Keefe, Bruyette & Woods analyst Brian Gardner had clear instructions for investors contemplating the ongoing battle to repeal the Durbin amendment or scrutinize banks further.
``Ignore the noise,'' he said in a note. (Reporting by Alexandra Alper; editing by Matthew Lewis and Andre Grenon)