The Battle Over Interchange: Both Sides of the Durbin Amendment

The battle over interchange is heating up in Washington thanks to the last minute adoption of the “Durbin Amendment” to the “Restoring American Financial Stability Act of 2010”. The amendment (also known as the “Swipe Bill” or the “Interchange Amendment”), if enacted in its current form, would provide the Federal Reserve with the authority to establish rules and regulations governing the interchange fees that issuers and payment card networks could charge for certain debit card transactions.

The lobbying activity around the bill is heating up this week, as President Obama has requested that the financial reform bill be ready for signature by early July. Who is involved in the lobbying? And what are their positions?

We’ve collected some of the position statements from the most active groups in the tables below. Stay tuned as this battle heats up.

Groups in Favor of Durbin Amendment Position
Merchant Payments Coalition Supports the Durbin Amendment.

“Because of Sen. Durbin’s amendment and his efforts to push this measure through the Senate, business owners and their customers are one step closer to real, tangible reform. This amendment will enhance transparency and help protect businesses and their customers alike from these unfair, hidden fees.”

National Retail Foundation Supports the Durbin Amendment

In a major victory for retailers, last week the U.S. Senate took action that will greatly reduce the excessive “swipe fees” you pay on debit card transactions. This critical amendment to the Financial Regulatory Reform package was not included in the legislation passed earlier by the U.S. House of Representatives. It is critically important that you contact your member of Congress and ask that they support fixing “swipe fees” in the U.S. House of Representatives!

National Restaurant Association Supports the Durbin Amendment

The National Restaurant Association and 30 state restaurant associations recently joined more than 200 other merchant organizations in asking members of the U.S. House of Representatives to give restaurants and other merchants a break on some payment card-processing fees. Today, in a letter to House members, the National Restaurant Association urged members to include an amendment, sponsored by Sen. Dick Durbin (D-Ill.) and previously passed in the Senate, in the final financial reform bill.

“Interchange fees are often restaurants’ third greatest operating expense, behind labor and food costs. Merchants pay about $48 billion in interchange fees every year,” said Scott DeFife, Executive Vice President for Policy and Government Affairs for the Association. “We are grateful to Senator Durbin for his leadership on this important issue, and appreciate the bipartisan support for addressing the problem of interchange fee practices, and for providing relief to businesses who have seen their interchange fees skyrocket in recent years.”

Groups Opposed to Durbin Amendment Position
Electronic Payments Coalition Opposes the Durbin Amendment.

The Senate recently adopted an amendment to the financial reform bill that will cut giant retailers a break, while forcing consumers to pay more to use their debit cards.

The amendment allows the federal government to set the rate that merchants pay to accept debit cards. If this amendment passes, consumers will pay higher fees and receive fewer rewards – while seeing no difference in price at the register. Consumers shouldn’t have to pay more so giant retailers can profit.

This amendment has already made its way through the Senate, but there is still a narrow but critical opportunity to prevent it from becoming law. Send your letter today.

Credit Union National Association (CUNA) Opposes the Durbin Amendment

Last week the US Senate approved the Financial Regulatory Reform Bill including a provision that would mandate price controls on the interchange fees paid by merchants for accepting debit cards. This bill has unintended consequences for credit union members and every consumer with a debit card in his or her wallet.

National Bankers Association Opposes the Durbin Amendment

Interchange revenue (from debit cards), in addition to providing no and low – cost banking products and services such as free checking and neighborhood development programs like financial literacy, also helps to offset higher than normal operational expenses that our member banks experience.

Independent Community Bankers of America (ICBA) Opposes the Durbin Amendment

“If interchange fees are reduced through government regulation, consumers would face higher costs through annual fees and increasing interest rates, as well as fewer choices as community banks are forced to exit the market, with the net result leaving consumers with few options for their payment cards except for big banks.

“Merchants receive guaranteed payment, increased profits, and reduced expenses when they accept cards. However, it has become clear that they do not want to pay for these benefits and are attempting to shift this business expense onto their customers. ICBA urges Congress to oppose H.R. 2695, a bill that will reduce competition and hinder our economic recovery, America’s consumers and the Main Street community banks that serve them in cities and towns throughout America.”

American Bankers Association Opposes the Durbin Amendment

ABA believes that interchange rates and governance should be set by the free operation of the market forces in the private sector. ABA opposes proposals to have state or federal governments set price controls or otherwise regulate interchange rates, which currently are set by the private market through contractual relationships.

MasterCard International Opposes the Durbin Amendment

In short, this amendment helps big merchants, but consumers will pay the price.

The Durbin amendment is opposed by community banks and credit unions as well as small business organizations. For example, the Independent Community Bankers of America and the Credit Union National Association have noted that the amendment would “significantly harm thousands of community banks and credit unions that offer debit and credit cards to their customers and members.” Additionally, small business organizations like the National Black Chamber of Commerce and the Latino Coalition have also expressed their opposition directly to Senators.

We urge Members of Congress to protect consumers, community banks, credit unions, and small businesses by opposing this amendment as the bill moves forward.

Visa, Inc. Opposes the Durbin Amendment

Visa believes that these attempts not only are wrong but also are harmful to consumers and other system participants. The regulatory intervention that the retail lobby seeks would result in fewer payment choices, a reduction in benefits for consumers and possibly higher costs for consumers in their monthly statement and/or at the checkout counter. Ironically, merchants would also suffer from unintended consequences of poor regulatory intervention. This scenario has been tested in Australia, with harmful and unintended consequences for all parties.

Visa continues to believe that vigorous and fair competition, rather than government regulation, should be the guiding principle in the development of a safe, robust and innovative payment system. Visa remains concerned that the artificial suppression of interchange may lead to less competition and reduced innovation in the marketplace but remains committed to providing a world-class payment system that meets the fundamental payment needs of consumers, retailers and financial institutions globally.

State Treasurers and State Benefits Administrators from 15 states Opposes the Durbin Amendment

n a joint letter to congressional leaders, 10 state treasurers explained their opposition. “Quite simply, the financial institutions that issue these prepaid debit cards do so at little or no cost to states because they are able to rely on interchange to cover their costs. If the Durbin amendment becomes law, this will no longer be the case and we are seriously concerned about the viability of these programs. Even if these programs continue, we are concerned that financial institutions will be forced to raise fees on cardholders or States to recoup lost revenue.”

Russell Simmons

(Mr. Simmons is one of the founders of UniRush LLC, the company behind the RushCard plus prepaid Visa card and other RushCards)

Opposes the Durbin Amendment

Mr. Simmons published the following in an “open letter to Senator Durbin”:

I’m writing you as a long time advocate for the poor and as a business owner of a debit card service for the under-banked. The mission of my business is to provide millions of Americans access to debit cards with transparent low pricing and services that help our users budget, build credit, buy affordable healthcare and participate in the U.S. economy in a way that the rest of us take for granted. I started the business when no one believed it in, seven years ago, after seeing and hearing of the indignity and hardship caused the 80 million Americans who are left out of the banking system.

With that background, I am gravely concerned about the potential unintended consequences of the “Durbin Amendment” to the Senate financial reform bill that just passed and is going into conference committee with the House next week.

Let me say from the outset, that I have no stake or interest in the politics of regulating large banks, or the various lobbying efforts on their behalf, or on behalf of large retailers who want to see interchange fees reduced. However, I am extremely concerned about the potential impact of the amendment, if left unmodified, on the ability of community banks, credit unions or specialist providers to the under-banked to provide card services at affordable rates. That in turn would hurt the poor and the underserved by either raising fees or limiting the availability of this vital service. This would have a grotesquely unfair impact on the most vulnerable and the most heavily hit consumers, including minorities. I would be compelled to fight this publicly and actively….

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