The EPC, whose members represent financial institutions that fall under the $10bn threshold for debit card interchange fee regulation, have stated what many in the industry recognize as one of the most challenging aspects of the Durbin Amendment, which is how exactly is a dual interchange schedule going to work?
“The so-called ‘carve out’ for smaller card issuers will simply not work, given the way the law is constructed. Merchant discrimination and market forces will pressure small issuers out of the marketplace and consumers will be left with fewer options. Let’s be clear – this was added to secure votes on an amendment that was a gift to the top 1.5% of giant retailers who accept 81% of debit volume. You cannot decimate the economics of a thriving, growing market like debit cards and then expect to protect a portion of the market from the fallout. Even the Federal Reserve staff who drafted the rule acknowledged that smaller financial institutions may not ultimately be protected.”
Since the Federal Reserve Bank draft rules offered no guidance other than to state that dual interchange is allowed, the card networks have been singularly silent. However, just recently Visa announced they do intend to support a dual interchange strategy. Yet their announcement, which may have released some industry pressure, more importantly, may have also allowed organizations like the EPC to grasp onto its vague promises as a rallying cry to legislators.
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