WASHINGTON – Sen. Richard Durbin, author of the bank bill’s provisions on interchange fees, on Thursday slammed MasterCard and Visa for allegedly frightening credit unions and banks into a mass lobbying effort against his measure.
Durbin, the second-ranking Democratic senator, sent a sharply worded letter to the CEOs of both card networks yesterday accusing the two credit card firms of deliberately trying to frighten small banks and credit unions into lobbying against the measure. He also warned Visa and MasterCard that any coordinated action to make changes to their fees and rules to disadvantage smaller banks could trigger federal antitrust investigations.
The unusual attack comes as CUNA, NAFCU and the banking lobbies are massing against the interchange provisions, which could force large institutions – but not those with less than $10 billion in assets – to lower interchange fees charged retailers on debit transactions. CUNA and NAFCU are calling on their members to fight the proposal, which passed the Senate but is not in the House’s version of the bill. Credit union lobbyists hope to persuade lawmakers to eliminate the interchange provisions when House and Senate leaders meet to reconcile the different bills.
In a letter to MasterCard CEO Robert Selander and Visa CEO Joseph Saunders, which was obtained by Credit Union Journal, Durbin said Visa and MasterCard are deliberately signaling to smaller banks that the credit card giants will change their network rules in order to hurt smaller member banks if Durbin's amendment becomes law.
“It appears that, in an effort to frighten small banks and credit unions into opposing the amendment, your companies are threatening to make changes to your small bank interchange fee rates and to your network operating rules,” wrote Durbin. “These changes, which are not in any way required by the amendment, are unnecessary and would disadvantage small card-issuing institutions.”
Late yesterday NAFCU President Fred Becker issued a statement denying his group had been pressured by the card networks. “We have not been threatened by either MasterCard or Visa and are not aware of any threats to our members individually or to the credit union industry as a whole,” said Becker. “Furthermore, our independent analysis indicates that when placed into practice, the interchange provision will do nothing but add to the bottom lines of big box stores and giant retailers – all at the expense of consumers and small financial institutions.”
Durbin told the MasterCard and Visa CEOs his provision was carefully developed to protect small banks and credit unions, “and I went to great lengths to protect the ability of these small institutions to successfully compete with big banks in offering payment cards to consumers.”
“The only way that small banks or credit unions could experience interchange rate reductions or be discriminated against is if your companies decide to cut small bank interchange rates and rescind your operating rules that currently prohibit discrimination between card-issuing banks,” wrote Sen. Durbin. “Sadly, it appears from your companies’ public statements and other communications that you are contemplating just such steps.”
“If your companies were to coordinate such punitive actions in the same way that you appear to have coordinated your messaging tactics, serious concerns would be raised that you are engaging in an unlawful restraint of trade,” wrote the senator. “Further, I would caution you not to collude with your largest member banks to change your fees and rules in an effort to protect the big banks against competition from smaller card-issuing banks. Such steps would also raise serious antitrust concerns.”
Both MasterCard and Visa once were cooperatively owned by banks and credit unions. Since they went public four and three years ago, respectively, they continue to be controlled by the biggest banks, which would be directly impacted by the Durbin provision. Credit unions also continue to be shareholders in both networks, the only equities credit unions are permitted to own.
The biggest owners of Visa are JP Morgan Chase, Bank of America, Citigroup, National City Corp. and Wells Fargo, while Citi, JP Morgan and HSBC are among the biggest owners of MasterCard, according to proxy material filed with the Securities and Exchange Commission.
Representatives of both MasterCard and Visa did not return phone calls seeking comment yesterday.
