The Fight Over the Interchange Amendment Continues

Action remains heated in the debate over the Durbin “Swipe Fee” amendment and financial reform bills. Over the past few days, there have been more groups coming out for or against the debit card interchange rules.

George Mason University held a discussion about interchange recently, with several excellent videos from the discussion, including Payment Card Interchange Fees: Picking Up the Tab, and Payment Card Interchange Fees: Economics & The Limits of Regulation (featuring Todd Zywicki, the Economist who recently published a paper strongly opposing debit interchange regulation).

Also, letters to Congress have been flying fast and furious. One, addressed to Representative Gary G. Miller (R-CA 42nd), is available on and shows that the employees of GreenDot are rallying against the amendment. The letter states:

I am employed at Green Dot Corporation in Monrovia and I am writing to ask for your urgent help in fixing the “Durbin Interchange Amendment” so that it doesn’t accidentally cut off banking services to low income people.

The letter goes on to provide information about why Green Dot Corporation’s founder and CEO (Steven Streit) is against the interchange amendment, stating:

Why is Mr. Streit concerned with the “Durbin Interchange Amendment?”
According to Streit:
1) While perhaps well intended to help small business, the amendment, in fact, inadvertently puts the price of basic FDIC insured transactional bank accounts out of reach for millions of Low and Moderate Income (“LMI”) families- families that earn less than $50,000 annually.

2) The reason is that the amendment’s intent is to cut or eliminate the fees that retailers pay to banks to facilitate debit card transactions. These fees (called Interchange) typically cost the merchant 1.5% of a purchase. For example, on a basket of groceries of $50, the merchant pays around 75 cents to authorize, transact and settle the transaction.
3) Because the costs of running a debit card program are high (customer service centers, card plastics and mailing, monthly statements, online banking, consumer charge back and fraud protection, network settlement, guaranteed good funds to the retailer and electronic processing, data centers, etc), the only choice for banks, should this legislation pass, is to pass the cost of running a debit card program to the consumer.
4) This means a basic checking account at a traditional bank could cost $15-$20 per month. For a low cost account targeted to an LMI family, (like the Green Dot product) the cost could rise from the current $0 – $6 per month depending on the account, to $9-$15 per month. Such a fee hike would put these accounts out of reach for the millions of Americans who today rely on them to safely conduct their banking and payment needs. In other words, if passed as drafted, the amendment will cause millions of low income Americans to abandon their FDIC insured basic transactional account and debit card and instead return to the cash economy. Instead of having their paychecks safely direct deposited to their bank account, they will again have to rely on liquor stores, pawn shops and check cashing stores to conduct their “banking” in a high cost and personally unsafe atmosphere. This is a terrible and harmful outcome for such a massive segment of our country’s population. Over half of America earns less than $50k annually and over 5 million Americans today rely on low cost bank accounts that would be affected.
5) We don’t believe Senator Durbin or the other Senators who voted to pass the amendment intended to harm America’s low income population, but it will happen nonetheless unless the language is modified to protect LMI families.
6) For this reason and others, we understand that there are many in Congress who are working to get the amendment removed in conference. Furthermore, the Independent Community Bankers Association and both trade groups representing the nation’s Credit Unions are in strong opposition to the amendment. However, should removal of the amendment not be possible, there are a number of easy fixes or carve outs than can be added to the amendment that will allow Senator Durbin to achieve his goal of cutting interchange expenses for retailers, while helping to ensure continued access to safe and regulated banking accounts for millions of LMI American families.

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