At the One Stop on the East End of Charleston a 20-ounce orange Gatorade costs $1.49. If you buy one with a standard Chase-issued Visa debit card, about 12 cents of that transaction (11.87, to be exact), nearly 10 percent of the price, goes to Visa and Chase as a fee for processing the swipe of the debit card, One Stop President Michael Graney said.
“Swipe fees are sort of our worst enemy,” said Graney, who oversees 44 One Stops in West Virginia. “First of all, we have cost of goods sold, then labor as our second-biggest cost, the credit and debit fees are our third-biggest cost. So it dramatically affects my profitability.”
The fight over swipe fees is very complex and for very high stakes. Visa alone lists 264 separate rates of payment for swipe fees, depending on things like the type of card and what kind of purchase it is used for. It pits the nation’s largest financial institutions — like Visa and Chase — against the nation’s largest retailers — companies like Wal-Mart and Target — with both sides employing hundreds of lobbyists in a fight over billions of dollars a year in fees.
Smaller banks often partner with larger ones to issue credit cards, so they get a little money from swipe fees, but it’s not nearly as important to them as it is to the larger banks, said Joe Ellison, president of the West Virginia Bankers Association.
“Community banks that don’t have their own credit card system, they provide it mainly as a service to their customers because they don’t make very much money on it,” Ellison said.
The 2010 Dodd-Frank financial reform act was passed after the financial crisis in an attempt to regulate and rein in the financial industry and forestall another crisis. Among many other things, it imposed limits on how much big banks — those with more than $10 billion in assets — can charge for debit card swipe fees. Soon after, Rep. Shelley Moore Capito, R-W.Va., sponsored a bill to delay the rules on swipe fees.
“Experts worry that small financial institutions will have to resort to increasing fees on checking accounts and other services, which will hurt consumers,” Capito’s office wrote in proposing the delay.
The bipartisan bill didn’t pass, but the limit on swipe fees ended up higher than had been written in Dodd-Frank and the fight continues in the courts.
It’s a familiar theme. Capito’s political opponents accuse her of cozying up to Wall Street’s biggest banks, while she counters that she’s looking out for community banks that support local economies.
West Virginia Secretary of State Natalie Tennant, Capito’s main opponent in the race for U.S. Senate, began a recent speech to the state Chamber of Commerce with an anecdote about swipe fees, and an attack on Capito.
“Everywhere I go, West Virginia small-business owners, from Tucker County to Beckley, tell me these fees are killing them,” Tennant said last week at The Greenbrier resort. “This race offers a clear choice between my record of working for West Virginia and my opponent’s record of working for Wall Street.”
Tennant’s campaign also pointed to the fact that Capito’s husband, Charles, was hired as an executive by Wells Fargo in 2011, two weeks after Capito introduced her bill delaying swipe fees. Wells Fargo spent nearly $6 million lobbying the House and Senate on financial issues, including swipe fees, in 2011.
Capito declined an interview request for this article.
“West Virginia’s community lenders are struggling to handle the growing regulatory burden imposed by Obama and his allies following the financial crisis,” Amy Graham, Capito’s spokeswoman said. “Shelley is fighting back and has been a huge advocate for local lenders.”
The swipe fee issue is emblematic: Whether it’s banks versus retailers or banks versus regulators, Capito tends to side with the banks.
“To say that she’s a friend of bankers, absolutely she is, because she’s looking out for bankers because she knows what banks are going through,” Ellison said. “But when you say banks, that’s all banks, and to label her as a Wall Street banker is absolutely false. That is not true. What she does benefits every bank.”
In the most recent session of Congress, Capito has been the lead sponsor on six financial industry bills. Five of the six would either ease regulations on banks or place more restrictions on bank regulators.
None of those five bills have passed, but two achieved at least part of their goals through rule-making or similar processes.
“When you look at not only the bills she’s sponsored but how she votes and what she advocates for, she has been a staunch, down-the-line ally for Wall Street’s biggest banks,” said Dennis Kelleher, the president of Better Markets, a nonprofit that advocates for financial reform. “This constant refrain of Wall Street’s allies that they only care about community banks is just grossly misleading.”
Capito’s office, in explaining the bills, argues that they aim to ease regulations on local and regional banks and credit unions, not the largest ones.
Regardless, it does seem like bankers of all stripes appreciate her work.
For at least the past four years, Capito has been a featured speaker at the West Virginia Bankers Association annual convention.
Out of the 435 members of the House of Representatives, Capito has collected the third most money from commercial banks this election cycle, according to the Center for Responsive Politics. (The top 10 recipients of banking money are all Republicans, and all, except Speaker John Boehner of Ohio, sit on the House’s Financial Services Committee. Six of the top 10 also serve on the financial institutions subcommittee that Capito chairs.) In her most recent election, Capito collected the fourth most money from the banking industry. The list of her top donors is peppered with big financial institutions: $47,350 from Citigroup, $23,800 from Wells Fargo, $23,000 from Bank of New York and $21,999 from Goldman Sachs, among others.
Capito’s bank bills
The Consumer Financial Protection Bureau was created by Dodd-Frank to try to protect consumers from unfair or deceptive financial products. Republicans have consistently argued that the new agency is too powerful, too burdensome and unaccountable. The Subcommittee on Financial Institutions and Consumer Credit, which Capito chairs, has held several hearings on the agency.
The agency polices and, if necessary, fines a broad array of financial actors, from banks to mortgage lenders to car dealers. With the money it collects, it compensates consumers who were harmed, or funds financial literacy and education programs.
Last May, Capito’s committee held a hearing on 11 bills or bill drafts, all introduced by Republicans and all of which would alter or hinder the CFPB in some way.
Capito’s bill, which passed out of committee in June on a party-line vote, would eliminate the agency’s ability to repay consumers from the penalty money it collects.
“My issue is not that the bureau is collecting these fines, my issue is that the taxpayers would be better served if these fines were remitted to the Treasury to pay down the historic national debt,” Capito said at the hearing, noting that other regulatory agencies send the fines they collect to the Treasury.
Speaking immediately after, Rep. Gregory Meeks, the ranking Democrat on the committee, expressed his party’s concern.
“I just hope that we’re not trying in certain ways to undermine or weaken or cripple the CFPB,” Meeks said.
Capito also has sponsored bills during this Congress to delay new requirements on how much capital smaller banks must hold to reduce risk, and to exempt smaller banks from having to sell a certain type of collateralized debt obligation (CDOs), a complex financial instrument that failed during the financial crisis.
Neither bill has passed, but the ends for both were mainly achieved through different means. The capital requirements addressed by Capito’s bill have been delayed on all banks, not just small ones, until at least 2019. Capito’s bill calls for a further delay for small banks until a study is done.
Another bill — which Capito has twice proposed with Democratic co-sponsors — would make it easier for banks to appeal regulatory decisions that they do not like and to make those appeals to a different agency than the one that issued the initial decision.
After her recent speech at The Greenbrier, Capito responded to the attacks by pointing out that, in fall 2008 — during the peak of the financial crisis — she voted against the bailout of the financial industry.
“[You] Don’t really hear about that,” she told a group of reporters. “So I think my record speaks for itself.”