Once again, I found myself riveted to my computer screen as Iwatched the House Financial Services Committee hearing on the DurbinAmendment that took place today in Washington. However, unlikethe Federal Reserve Board meeting in December (where the draftrules were quietly reviewed), the tenor of this hearing was quitedifferent. I shamelessly borrowed the title of this blog from FrankMichael, president and CEO of Allied Credit Union, who used thisphrase in his testimony. Sounding more like a rallying cry than anargument, this brief slogan perfectly captured the message that thedebit issuing community has been aggressively pursuing with membersof Congress — especially in recent weeks.
The largely bi-partisan opinion of most committee members seems tobe that any implementation of the Durbin Amendment should bedelayed until further studies can be undertaken. The suggestedtopics mentioned as needing more analysis ran the gamut fromanalyzing issuer costs and determining the impact to communitybanks and credit unions to studying fraud trends and getting to the”right standard.” Federal Reserve Board Governor Raskin vigorouslydefended their survey and analysis process, not giving much groundto the suggestion that there were costs not considered in theiroriginal analysis. However, she also stated that all costs had tobe filtered through the language of the Amendment, which is howthey arrived at their fee structure. Hence, the sticky wicket.
The second panel consisted of representatives from both themerchant and issuer communities as well as Visa’s general counsel.As expected, each side took their position and stuck with it.Merchant representatives cited an ever increasing cost of paymentsand lack of control, while the issuers/card network cited thebenefits of electronic payments and, most importantly, the lack ofbenefits to consumers and the small financial institution communitypresent in the Amendment and its resulting draft rules.
Going into this hearing, I was of the mindset that stopping themomentum of the Durbin Amendment is unlikely to happen. Coming outof this hearing, I’m not so sure. The merchant community may havemade one very important mistake in their run up to thislegislation, and that is not being much clearer about benefits tothe consumer given such a large reduction in interchange fees. Thismay end up being a key issue that tips the balance in favor ofissuers. However, there is a still a long way to go. The door isnow open for legislators to take a very close look at theinterchange system, which is not without its flaws. It looks as ifthe issuing community won this round, but the battle is far fromover.