Shares of Purchase-based MasterCard Inc. rose Friday following the Senate passage of a financial reform bill that must now be reconciled with the House version.
Citing Philadelphia-Based Janney Capital Markets, the Associated Press reported investor advice on the stock had shifted from neutral to buy. The stock was up 4.05 percent Friday, or 8.35 points to 213.85.
The Senate’s version takes a harder line on derivative trading than does the House version, which has proven to be the headline-grabbing element of the two bill’s differences.
But MasterCard opposed another amendment regarding fees on cards.
In a statement, MasterCard said:
“Now that the Senate has approved the Financial Regulatory Reform Bill, MasterCard urges House and Senate conferees to reject the amendment tacked on by (Illinois) Sen. Dick Durbin, which will hurt the people and businesses it is supposed to protect. Consumers, community banks and credit unions will all pay if this thinly veiled attempt by merchants to increase their profitability at their customers’ expense becomes law.”
The industry fought off earlier efforts to regulate the so-called interchange fees by saying they are needed to make up for the risk of lending. The fee on debit cards, Bloomberg Businessweek reported, may have helped win over some of the 17 Republicans who voted for the Durbin amendment, since debit cards by their definition do not involve lending. GOP Sen. Susan Collins, who supports the Durbin idea, called it a reasonable approach.”
The Fed would have authority to limit fees that merchants pay to accept debit cards, under the Durbin plan.
The Senate’s 64-33 vote for the amendment was a setback for MasterCard Inc., along with Visa the two biggest payment networks, according to Bloomberg Businessweek. The major card companies set interchange rates on debit and credit cards and pass that money along to issuers such as Bank of America, Wells Fargo and JP Morgan Chase. The fees average about 2 percent on credit cards and 1 percent for debit cards, generating more than $40 billion a year for U.S. lenders.
There is not tout sheet on the Durbin amendment’s prospects in the reconciled bill. MasterCard bases its appeal for defeat of the Durbin measure on the pocketbook:
“The amendment is a shrewd but cynical approach to getting American consumers to pay big-box merchants, fair share for the benefits these merchants get from electronic payments,” said Noah Hanft, MasterCard general counsel, in a prepared statement. “There’s a price-tag on this bill, and it will be paid by the American consumer.”
The Senate bill must be reconciled with the House version before it can become law.
MasterCard shares approached annual trading highs in mid-April, topping $264. After that, the stock lost about 22 percent of its value, as investors worried about various amendments to the regulatory reform bill and as the market has tumbled overall – sometimes in heart-stopping fashion – from an 11,258 high in April. It closed at 10,193 Friday.
On Friday, MasterCard shares added $8.35, or 4.1 percent, to close at $213.85.
Visa shares added $1.38, or 1.9 percent, to close at $74.20.
Proposed various credit card interest rate caps could have reduced the number of cards issued, and curbs on the credit and debit card fees could hit MasterCard’s profit if the Durbin plan flies. A plan that could eventually limit debit card fees did go through, but those fees are less important to MasterCard than to its larger rival, Visa Inc., according to web sources.
Visa CEO Joseph Saunders criticized the reform bill, particularly the Durbin amendment. Saunders said the bill could “significantly harm consumers” by giving them less choice, higher costs for checking accounts and online banking fees and reduced debit card benefits like rewards.
