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Senator seeks credit card fee plan in bank bill

By Kevin Drawbaugh

WASHINGTON (Reuters) - The No. 2 Democrat in the U.S. Senate said on Wednesday he will push to amend a massive Wall Street reform bill with a measure addressing credit card fees affecting retailers.

So-called "interchange" fees are charged to supermarkets, convenience stores and other merchants by firms such as Visa and MasterCard every time a customer uses a credit card. Fees totaled $48 billion in 2008, up from $42 billion in 2007.

"We're going to have a bill that addresses the interchange fee and try to bring some fairness to it," Senator Richard Durbin said in remarks on the Senate floor. "This is one of the major concerns of retailers and businesses.

"We're not saying there shouldn't be an interchange fee," he added. "We're saying it should be reasonable."

Analysts say they do not expect Durbin's proposal to be approved this year, but a wave of public anger at the financial industry is giving momentum to proposals in Congress to crack down hard on banks and capital markets.

Fears of changes to interchange fees have recently hurt shares of Visa and MasterCard, Sanford C. Bernstein analyst Rod Bourgeois said on Monday. A congressional hearing on the issue was held last week, adding to those fears.

Three amendments affecting interchange fees, including Durbin's, are under discussion in Congress, said Concept Capital policy analyst Jaret Seiberg.

"The danger here is that these amendments open the door to future interchange legislation or regulation. So we see the industry fighting to derail these provisions," he said.

Durbin's proposal would let merchants give discounts to customers who use one type of credit card over another, or who pay by cash or some means other than by credit card. They could also set minimum purchase levels for using a credit card.

"The measure is relatively benign, which means it will be hard to defeat ... This is the amendment to watch," Seiberg said in a research report.

(Editing by Dan Grebler)