UPDATE 3-Challenges to Dodd-Frank surface in U.S. Congress

Tue Mar 15, 2011 4:57pm EDT

* Bipartisan Senate bill would delay debit card fee cap

* House Republicans to move bills on Wednesday

* Uphill climb seen by analysts for measures (Adds MasterCard statement)

By Kevin Drawbaugh

WASHINGTON, March 15 (Reuters) - The first targeted legislative challenges to 2010's Dodd-Frank financial regulation reforms are emerging in the U.S. Congress, with nine senators introducing a bipartisan bill on Tuesday to delay a proposed cap on debit card interchange fees.

The cap, proposed by the Federal Reserve as required under Dodd-Frank, is opposed by card networks Visa (V.N) and MasterCard (MA.N), as well as big banks such as Citigroup (C.N) and JPMorgan Chase (JPM.N). Industry lobbyists have been working hard to block it.

Democratic Senator Jon Tester and eight other senators from both parties have introduced a bill to suspend implementation of the cap and study the fees for two years.

"We are confident that a study will show that directing the government to fix prices rather than letting the free market system work will result in higher prices for consumers," said MasterCard General Counsel Noah Hanft.

Bank of America Corp (BAC.N), the largest U.S. bank, has said the cap could cost it as much as $2.3 billion in fee revenues annually. At the Fed's proposed level, the cap would cost banks about $13 billion in revenues, said CardHub.com.

Less than a year after the passage of Dodd-Frank -- a response to the worst financial crisis in generations and a severe recession -- the financial industry is making some headway on trying to roll back reforms it opposes.

Republicans in the House of Representatives on Wednesday will stage their first outright challenge to Dodd-Frank with a fistful of bills favoring private equity firms, derivatives end-users, credit rating agencies and corporate CEOs.

The bills face a long road ahead. Republicans may be able to obtain House passage, perhaps with Democratic support on some issues. But Senate action could be hard to come by and the Obama administration could veto any measure it opposes.

If they stay narrowly focused, one or more of the House measures could advance, but regulatory relief bills tend to expand and lose momentum, said MF Global financial services policy analyst Jaret Seiberg.

"That doesn't mean a bill cannot be adopted this year. It is just an uphill fight," he said.

BATTLE OVER FEES

Banks and retailers are waging a pitched battle over "interchange" fees, which merchants pay banks every time a customer buys something with a debit card.

Dodd-Frank ordered the Fed to set a "reasonable and proportional" level for the fees. In December, the Fed proposed capping fees at 12 cents per debit transaction -- a nearly 75 percent cut from 2009's average of 44 cents.

The chief author of the fee cap in Dodd-Frank was Richard Durbin, the No. 2 Senate Democrat. He said he will oppose any attempt to delay the cap as it would only "line the pockets of the credit card giants and Wall Street banks."

In the House, one new Republican bill would exempt private equity firms from registering with the Securities and Exchange Commission, as required under Dodd-Frank.

Another bill would amend Dodd-Frank in a way that would shield end-users of over-the-counter derivatives from new central clearing requirements and the costs involved.

Another would repeal part of Dodd-Frank requiring public corporations to disclose the median pay of all employees, the total pay of the chief executive officer and a ratio comparing the two numbers. This promised to be embarrassing to CEOs whose pay dwarfs that of lower-level workers.

A fourth bill would repeal a Dodd-Frank provision exposing credit rating agencies, such as Moodys Corp (MCO.N) or Standard & Poor's, to legal liability in cases where their ratings were found to be inaccurate. Standard & Poor's is a unit of McGraw Hill MHP.N.

A final bill, not dealing with Dodd-Frank, would raise to $50 million from $5 million the limit under which small companies may access the public capital markets without having to undergo the full SEC registration process.