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Senate Proceeding on Jun 8th, 2011 :: 3:43:00 to 3:52:45
Total video length: 8 hours 50 minutes Stream Tools: Stream Overview | Edit Time

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Jon Tester

3:42:57 to 3:43:17( Edit History Discussion )

Jon Tester: senior senator from montana for his leadership. thank you, max. mr. president, i want to take a moment here to clarify for my colleagues the intent of this amendment, to further clarify it. not surprisingly, a number of groups have made a number of claims about what this amendment is and what it is not. in drafting any regulations

Jon Tester

3:43:00 to 3:52:45( Edit History Discussion )
Speech By: Jon Tester

Jon Tester

3:43:18 to 3:43:38( Edit History Discussion )

Jon Tester: required by -- in drafting any regulations required by this amendment, any agencies involved are required to not only abide by the letter of the law, but also the congressional intent of its office. so let me take a minute to try to make crystal clear what exactly the intent of this amendment is. first of all, let me address

Jon Tester

3:43:39 to 3:43:59( Edit History Discussion )

Jon Tester: some of the claims that have been made about the implementation date of debit interchange regulations. my amendment would direct the fed to implement these provisions on a date of their determination. why was this language included this way? the intent of this language is to provide the fed with the discretion to implement these regulations as quickly as is

Jon Tester

3:44:00 to 3:44:20( Edit History Discussion )

Jon Tester: practically possible for merchants, issuers and networks to prepare for such new regulations. the hope of this language would be to avoid the situation that we're in right now, where parties impacted by these changes will likely have less than a month to implement significant changes to the debit interchange system.

Jon Tester

3:44:21 to 3:44:41( Edit History Discussion )

Jon Tester: to be clear, the fed may not disregard implementation of debit interchange regulation as some have articulated. they also may not arbitrarily decide to implement these rules five years from now. any delay in implementation beyond a reasonable time line of a few months would need to be justified by the fed.

Jon Tester

3:44:42 to 3:45:02( Edit History Discussion )

Jon Tester: let me also take a minute to address concerns that have been raised about the language that we've used to describe what considerations the federal reserve must make if a determination is made in this amendment and the federal reserve is directed to rewrite debit interchange rules. the language states that the federal reserve shall consider consider -- and again, shall

Jon Tester

3:45:03 to 3:45:25( Edit History Discussion )

Jon Tester: consider all fixed and incremental costs in determining what is reasonable and proportional interchange fee is. again, let me say this again. the fed shall consider, not include, not calculate, but shall consider all fixed and incremental costs. that word's important because consider provides the fed with

Jon Tester

3:45:26 to 3:45:46( Edit History Discussion )

Jon Tester: the discretion to consider and determine using their judgment what is reasonable and proportional, being that any costs considered would need to be justified to the fed. to further clarify, the language directs the fed to consider all fix pped -- fixed and incremental costs associated with debit card transactions and

Jon Tester

3:45:47 to 3:46:07( Edit History Discussion )

Jon Tester: program operations and allow incentives for a more innovative, efficient and secure payment card network. why did we include all fixed and incremental costs? that's because the original statute limited the costs that the federal reserve could consider to only those costs associated with the authorization, clearance or

Jon Tester

3:46:08 to 3:46:28( Edit History Discussion )

Jon Tester: settlement of a particular electronic debit transaction. this language severely limits the costs to issuers that the fed may consider in calculating reasonable and proportional rates and is in a large measure why the federal reserve's proposed rule is currently at 12 cents. there are a number of fixed costs that are associated with

Jon Tester

3:46:29 to 3:46:49( Edit History Discussion )

Jon Tester: debit transacks, chief among them fraud costs, which are also arbitrarily limited in the original statute. the fraud language states that the federal reserve may -- not must, but may allow for a fraud adjustment for costs associated with fraud prevention. now, the federal reserve draft

Jon Tester

3:46:50 to 3:47:12( Edit History Discussion )

Jon Tester: proposal did not include any fraud adjustment, and we have no idea what an adjustment might look like or whether the final rule would include one, but if it did, it could only include an adjustment related to fraud prevention, not the actual costs or losses associated with fraud.

Jon Tester

3:47:13 to 3:47:33( Edit History Discussion )

Jon Tester: take, for example, the breach by michael's store, a breach, by the way, which was the fault of the retailer who had their debit kiosk compromised. what was the cost to the issuer of the cards which were compromised? well, they were significant. first of all, it was a community bank in illinois who had a fraud monitoring program that identified the threat and alerted the retailer that their

Jon Tester

3:47:34 to 3:47:54( Edit History Discussion )

Jon Tester: kiosks had been compromised. then there was the cost to these issuers of making their customers whole again for the losses that they sustained by criminals removing funds directly from their bank accounts, $500 at a time. additionally, issuers had to foot the costs associated with reissuing the cards and opening new accounts for customers with compromised accounts.

Jon Tester

3:47:55 to 3:48:16( Edit History Discussion )

Jon Tester: but none of those costs associated with fraud and losses assumed by the issuers could be calculated in the fraud adjustment under the current statute. that's why we included language directly with the federal reserve to consider all fixed and incremental costs associated with debit card transactions and program operations to capture those costs.

Jon Tester

3:48:17 to 3:48:38( Edit History Discussion )

Jon Tester: fraud losses and monitoring programs are not associated with individual transactions. nor is the creation or reissuance of physical cards, account maintenance or card holder services. let me also say that what we do not believe is included in any reasonable and proportional fixed and incremental costs associated with program operations.

Jon Tester

3:48:39 to 3:48:59( Edit History Discussion )

Jon Tester: as a result of our conversations and consultations with the fed, we do not believe that rewards programs or miles, neither would nor should be considered as per missable compensation, nor should be any executive compensation nor should the costs of maintaining a.t.m. machines. and why did we include the

Jon Tester

3:49:00 to 3:49:20( Edit History Discussion )

Jon Tester: language in allowing the federal reserve in setting reasonable and proportional rates to allow insentives for a more innovative and secure payment card network? we added in because of conversations with the federal reserve about what sorts of costs would be included in reasonable and proportional costs. they indicated that right now they do not have the ability to incentivize savings by issuers

Jon Tester

3:49:21 to 3:49:41( Edit History Discussion )

Jon Tester: to make processing more efficient or secure. it seemed like a pretty good idea to senator corker and i that we should give the federal reserve this kind of discretion and that issuers should be incentivized to lower costs below whatever the federal reserve determines to be reasonable and proportional. otherwise, the fee would likely stay the same for years to come as there would be no incentive

Jon Tester

3:49:42 to 3:50:02( Edit History Discussion )

Jon Tester: to lower costs. in addition to the flexibility provided by the federal reserve to set the rates, the amendment also intends to provide discretion to the federal reserve to include additional factors in the study, such as the overall impact of regulating interchange fees on small businesses and the economy, as well as discretion in the agencies that the federal

Jon Tester

3:50:03 to 3:50:26( Edit History Discussion )

Jon Tester: reserve may consult when drafting the study. in addition, it is intended that the findings must be made public and that the federal reserve is not required to start from square one. the intent is for the federal reserve to be able to build upon the information and insights that they have gathered already and are a part of the current record. finally, this amendment doesn't underminor inhibit the federal reserve's ability to implement

Jon Tester

3:50:27 to 3:50:47( Edit History Discussion )

Jon Tester: the routeing and network exclusivity provisions in the underlying statute. in fact, it does quite the opposite. we sought to preserve this language, and these provisions as they were originally included in the statute. in the last couple of days, as senators have suggested, additional changes that would improve consumer-related aspects of the study proposed by my amendment. i very much appreciate their

Jon Tester

3:50:48 to 3:51:08( Edit History Discussion )

Jon Tester: concerns and their interest on this critically important point and the changes that they have suggested are certainly ones that myself and other cosponsors are open to. unfortunately, the senator from illinois filled a second-degree amendment that essentially closed off any chance to make additional changes once the amendment was filed.

Jon Tester

3:51:09 to 3:51:30( Edit History Discussion )

Jon Tester: i am more than willing to work with my colleagues to find ways to continue to improve this amendment and ensure that consumers, small businesses and small banks and credit unions get a fair deal as we move to a regulated interchange marketplace, and that is what we will get out of this amendment. the same idea of regulation that 64 members of this body supported last year, but the difference between my amendment

Jon Tester

3:51:31 to 3:51:53( Edit History Discussion )

Jon Tester: and the current law is that we will ensure that the fed's regulations do not set the price below the costs of doing business. current law prevented the fed from looking at any number of elements of the cost of interchange. some fraud costs were yud to be included but not others. some technology costs were included but not others. why?

Jon Tester

3:51:54 to 3:52:14( Edit History Discussion )

Jon Tester: because the senate made those arbitrary decisions. the result is a proposed fed rule that sets debit interchange rate at 7 cents or 12 cents for all transactions, a level most folks agree is too low. let's -- let's allow the fed to find the actual correct number. as a farmer, i could tell you

Jon Tester

3:52:15 to 3:52:35( Edit History Discussion )

Jon Tester: that it costs me $3 to produce a bushel of wheat. it won't matter if i sell it for for $2 or $1 or 50 cents. i'll still go out of business because it's below my cost of doing business, and that is precisely what will happen to our smaller banks and credit unions.

Jon Tester

3:52:36 to 3:52:47( Edit History Discussion )

Jon Tester: with that, mr. president, i yield the i note the absence of a quorum. the presiding officer: the clerk

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