Senate’s Debit Interchange Sponsor Doubts Reconsideration

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WASHINGTON – The powerful senator who sponsored last year’s amendment to the Dodd-Frank Reform Act regulating debit card interchange is confident his provision will stand, even as the House begins deliberations aimed at changing the provision, or at least delaying its enactment.

“The Senate has no plans. There are no hearings scheduled,” said Max Gleischman, a top aide to Illinois Sen. Richard Durbin, author of the controversial interchange provision. The Durbin aide told Credit Union Journal he is confident the Senate will not take up the provision again, even as credit unions and banks mount a major lobbying effort for repeal, culminating in a hearing by the House Financial Services Committee later this week.

Meantime, Durbin, assistant majority leader in the Senate, tore into the American Bankers Association yesterday for what he said were mistruths being spread during the banks’ lobbying against the provision. He said while the banks are arguing that consumers will derive no benefit from the price controls to be set by the Federal Reserve, numerous consumer groups supported the amendment when it was passed by the Senate, then the House, last spring. He disputed that the provision will harm small banks and credit unions that would be exempt from the provision, noting that Visa, among others has indicated it will implement a two-tiered fee system separating the transactions for the smaller, exempt institutions from those with more than $10 billion in assets that come under the rule. He noted that banks argue they will be forced by the marketplace to set the same lower interchange fees applied to bigger banks, but asserted that the networks – not the banks – set the interchange rates.

In fact, Visa, during separate conference calls last week with credit unions and banks, reasserted its commitment to a two-tiered fee system.

But Durbin, responding to a letter last week from the ABA, said the banks were being disingenuous while trying to protect a setup that is lucrative for them and “not tempered by competitive market forces.” He called the system, where banks and card networks levy the fees on merchants, “unfair” to both consumers and retailers who have to pay fees that are non-negotiable.

“Issuers should be incentivized to manage other costs of operating a debit card system efficiently,” Durbin’s letter said. “The old, unregulated system encouraged networks to set rates at levels that subsidize inefficiency and that massively overcompensate banks at the expense of merchants and their customers.”

“I will vigorously oppose efforts to block the implementation of this needed reform,” Durbin added.


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