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Shane Osborn
Nebraska State Treasurer Shane Osborn (AP File)

Nebraska Treasurer Shane Osborn is persisting in his effort to get rid of a federal financial reform amendment that he says threatens to end the state's ability to save money by distributing benefits on prepaid bank cards.

In a clarification published Thursday, the Washington Post reported the amendment in the Senate version of finance reform would allow retailers to set minimum purchases on the use of credit cards, but not the prepaid cards used by states and the federal government to distribute benefits, instead of using checks, for the unemployed, those eligible for food stamps and Social Security.

That made no difference to Osborn, who has told House-Senate conferees retailers are unlikely to make the distinction.

That could make life more difficult for those who receive prepaid benefit cards, which save governments a lot of money as a replacement for issuing checks.

Retailers pointed out publicly that the prepaid cards are exempt from the amendment.

"I am appreciative of the Washington Post correcting their story and clarifying that the Durbin amendment does not allow merchants to set minimum purchase levels on debit cards," said Nebraska Retailer Federation President Jim Otto.

"The correction points out that the statement issued by Nebraska's State Treasurer was carefully written and technically true but designed to get the reader to jump to a false conclusion, as everyone knows that merchants ask ‘Debit or Credit?' whenever a Visa/MasterCard is presented."

In any case, Osborn says the amendment jeopardizes the state's ability to use the prepaid cards at all.

"A regulated debit interchange rate would decrease or eliminate the ability of financial institutions to offer these cost-effective programs to the public sector," Osborn wrote earlier in a letter to members of Congress. "Financial institutions issuing these cards may raise fees on cardholders or states to recoup lost revenue."

Bloomberg News reported the letter contains a passage almost identical to one on the website of Visa Inc., which also opposes the legislation.

On Thursday, Osborn's chief of staff, Trent Fellers, said in an e-mail the amendment could force Nebraska's prepaid card provider, US Bank, to eliminate the program.

Asked if USBank has given any indication it would do that if the amendment remains part of financial reform, Fellers responded: "We're looking to resolve this issue before we get to that point."

USBank spokeswoman Teri Charest said it would not be appropriate to speculate on pending legislation.

"But," she said, "it is important to know that we have an excellent working relationship with the state of Nebraska and we are very hopeful that the conferees on the regulatory reform bill will address the issues Treasurer Osborn has accurately brought to light."

The issue is part of the conflict between bank-card issuers -- Visa, MasterCard and big banks on one side -- and the retail industry on the other.

The amendment passed by a bipartisan majority in the Senate allows retailers to give customers discounts for paying with cash and to set price thresholds for accepting credit cards.

More objectionable to the card industry is assigning the Federal Reserve the job of determining whether swipe fees for debit cards are "reasonable and proportional."

Sponsoring Sen. Richard Durbin, (D-Ill.,) fired off a letter to Visa and MasterCard, which receive a portion of the swipe fees, that accused them of threatening higher fees for small banks that issue cards if the amendment remains in the bill. Meanwhile, congressmen from both parties joined forces to support the amendment.

"They're throwing everything they can at this to hang on to their pricing power," said Rep. Peter Welch, D-Vt., who had introduced a similar provision in the House.

Reach Richard Piersol at 402-473-7241 or dpiersol@journalstar.com. Bloomberg News and the Washington Post contributed to this report.

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