Many question the promises and results of the original Durbin Amendment, which grew out of the Great Recession. The Credit Union National Association (CUNA) does not hold back when it says:
“The federal government’s attempts to impose price controls by regulating interchange through [the Dodd-Frank Act’s Durbin Amendment] are the purest example of a failed government policy,”
The hearing has the usual lineup. The hearing group included industry representatives, Mastercard (Linda Kirkpatrick, President, North America), Visa (Bill Sheedy, Senior Advisor to Chairman and CEO), and Charles Kim, EVP CFO Commerce Bancshares), with three merchant related execs (Laura Karet, CEO Great Eagle; Ed Mierzwinski, U.S. Public Interest Research Group; Doug Kantor, General Counsel, National Association of Convenience Stores).
Dick Durbin came out boxing and used the politically insensitive term “Crazy Canadians” describing Canada’s low-cost Interac network.
There are hours ahead in the hearing. Where I got lost, sixty minutes into the hearing, is: why are the politicians not focused on the genuine issues today? Inflation is over 8%. Gas prices now average $4.23, slightly lower than the price of a gallon of milk, which stands at $4.21. A recession is looming. Interest rates are surging. There is an ugly, elevated risk with a geopolitical issue in Eastern Europe.
Enough of politics today. Merchants complain but seem to forget the failed efforts of Isis – a sell-side payment network that flopped a decade ago. The card industry remains focused on tech investments and fraud risk.
But the benefits of Durbin-I still miss the mark. Prices did not go down, consumers lost banking benefits when debit interchange price controls failed. Let us hope that Durbin-II does not decrease credit availability at a time when consumers need credit access.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group