Durbin Kills 1 Argument Against Interchange Reform
WASHINGTON-The chief sponsor of the Senate's interchange amendment creating price controls agreed last week to exempt all government programs from his provision, eliminating an argument being used by credit unions and banks lobbying against the measure.
Sen. Richard Durbin, the Illinois Democrat working to develop a regulatory scheme for the $50-billion-a-year market for credit and debit card interchange, said last week he will propose a new exemption, or carve-out, from the Senate-passed provision for some $8-billion a year in government benefits programs delivered with debit cards.
Durbin made the announcement during a hearing on how the federal government could save taxpayer funds by enabling the various federal agencies to negotiate directly with Visa and MasterCard and Visa on lower interchange fees. The two networks currently bar bilateral negotiations on fees. A study delivered by the Treasury Department during the hearing before the Senate Appropriations Subcommittee on Financial Services, which is chaired by Durbin, concluded the federal government could save as much as $400 million over five years by negotiating with the card networks on lower fees.
As many as 47 states also deliver benefits over debit cards in lieu of checks now, and had also lobbied against the provision. The latest Durbin bid got a major boost during the hearing when it was endorsed by Ed Mierzwsinski, the consumer advocacy director for public interest group U.S. PIRG.
Durbin said even if his amendment passed as part of the bank reform bill, as expected, he will push on with efforts to regulate the vast interchange market and open it to competition, outside of the Visa and MasterCard networks, which control more than 80% of the market.
Meanwhile, Vienna, Va.-based Navy FCU, one of three credit unions on the wrong side of the exemption from the amendment price-control provision, is calling on its 3.5-million members to urge Congress for defeat of the measure.
"We're against the Durbin amendment as it is today. We think it should go through the formal committee process [in the House] so Congress can look at it from all angles," said Navy FCU spokesman Jennifer Sadler of the amendment that was tacked on to the Senate version of the bank reform bill, though it was never voted in the House.
The nation's largest credit union is no longer a dues-paying member of CUNA so it did not participate in last week's fly-in lobbying effort on Capitol Hill. But it is working closely with NAFCU in fighting the measure, said Sadler.