New Assault Launched On Card Interchange

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WASHINGTON – A Senate subcommittee yesterday endorsed a bill that would cap interchange fees charged to federal government entities for taxes and other services at the lowest market rate, continuing efforts to lower interchange fees charged by credit unions and banks.

The effort comes even as the ink is drying on the Dodd-Frank Financial Reform Bill, which set up the federal government as arbiter of interchange rates on debit card transactions.

“This shows that just because this issue was addressed in Dodd-Frank it doesn’t mean it’s over with,” said Brad Thaler, senior lobbyist for NAFCU.

The new interchange amendment was inserted in one of a dozen appropriations bills that must be passed by the Congress at the behest of the chairman of the Senate Subcommittee on Financial Services and Government, Richard Durbin of Illinois, the senator responsible for the interchange amendment in the Dodd-Frank bill. Durbin’s latest amendment would cap interchange rates charged on transactions with federal government entities at the lowest current market rate, which generally is reserved for supermarket transactions. The lower rate charged for government transactions eventually could be used as a benchmark for the Fed’s determination on debit card rates.

Sen. Durbin has been fighting to open the market for credit and debit cards, currently dominated by Visa and MasterCard, to more competition. The Senator also is pursing a separate bill that would allow big retailers, such as Wal-Mart, to circumvent antitrust laws and negotiate lower rates directly with the card networks, putting more downward pressure on fees.

Recent studies show that consumers paid more than $62 billion in interchange fees on cards last year, more than $50 billion of it going through the two networks. Credit unions are believed to have earned about a tenth of those fees, some $6 billion.

The latest Durbin amendment must now be approved by the full Senate Appropriations Committee, which is scheduled to take up the subcommittee’s bill tomorrow, then by the full Senate. It would also have to be approved by the House, which has not yet taken it up. “There’s still a lot of steps to this,” NAFCU’s Thaler told Credit Union Journal yesterday.


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