Legislators including Senator Durbin (D-IL) have been musing of late about the expansion of his namesake amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to include credit cards. Coalitions of merchant groups have been suggesting to legislators that credit card interchange rates need to be regulated at a much lower level and like debit cards, credit cards should offer multiple network routing options.
Credit Union National Association (CUNA) and other organizations, including American Bankers Association and Independent Community Bankers of America, sent a letter to the Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services to let them know how damaging this type of legislation could be. A copy of that letter can be found here on CUNA’s website. The key points of the letter as summarized in an article by CUNA are as follows:
- Legislation in this space is unnecessary because the payments industry is more competitive than ever, with new players entering all the time, giving consumers and merchants a range of options.
- This effort by merchant groups to shift billions of dollars of consumer credit card spending to less secure, less innovative, and higher-risk transactions would make America’s payment system worse and put consumers in a vulnerable position.
- Having the government take away consumers’ choice to pick their credit card, and give it to large merchants, is fundamentally wrong.
- The Durbin Amendment is a failed government policy, leading to consumer prices increasing, far fewer community banks and credit unions across the country, and several small debit networks going out of business.
- The merchant proposal would reduce availability of credit to U.S. consumers and small businesses.
- Congress should not require the reengineering of the entire payments system just to benefit a small group of the largest retailers while causing small businesses to suffer.
It’s my opinion that this type of legislation is unlikely to get much attention or traction when there are bigger issues at stake including infrastructure negotiations, but it’s never a bad idea to get your speaking points in order.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group