Where's Durbin's Benefit, Asks Exec
LAS VEGAS-The pending Durbin Amendment on interchange income will not "benefit consumers in any way, shape or form," according to an executive with MasterCard. But the likelihood of the July 21 implementation date actually becoming a reality is also doubtful, the exec added.
Nat Rosenberg, SVP of U.S. Markets for MasterCard Worldwide, told attendees at the NACUSO Annual Conference the card company has been advocating against the Durbin amendment since it was introduced. MasterCard has compiled materials on its website that credit unions can access to put together grassroots campaigns.
"This was sold as a benefit to consumers, but if it goes through as written it will not benefit consumers in any way, shape or form," he said. "We do not yet know how processing and operations will shake out. There are lots of unknowns. Credit unions might be forced to add things to their cards and take away other things."
Rosenberg said in his opinion, not that of MasterCard, this is the first time a significant law was passed...and then hearings were held. "There are bills being introduced to deflect Durbin. The Fed was unable to make the April 21 date for the final rule, so draw your own conclusion if the Fed will make the July 21 date for the final exclusivity and routing rules," Rosenberg said.
The Cost of Ambiguity
Perhaps auditioning for one of the many comedy shows in Glitter Gulch, when Rosenberg took the stage he offered the following one-liner: "In summary, Durbin is bad, very bad," in a sad, low voice.
He then held up his hand and said, "Thank you, that concludes my presentation."
After the audience enjoyed a laugh, Rosenberg returned to serious business. He said MasterCard and other members of the industry are attempting to educate those in Washington as to the actual costs involved in operating the interchange network.
Asked if credit unions with less than $10 billion in assets-and thus supposedly not affected by the 7-cent to 12-cent cap on transaction fees mandated by the Durbin amendment-had nothing to be concerned about, Rosenberg said there is enough ambiguity in the law that leaves open a significant loophole in the proposed two-tiered interchange system.
"It says smaller institutions do not have to change their interchange rate, but the power shifts to the merchants. If the higher tier does not shift to something close to the lower tier, there can be discrimination on site. A member of a small credit union might have their card turned away or be surcharged. And the first time that happens, that member won't want to use his credit union card again."
Despite the dour tone of his talk, Rosenberg concluded with a mollifying comment.
"Durbin is not the end of the world," he said. "Credit unions need to keep an even keel, and whether Durbin goes through as is or is modified, they will have to craft a payment strategy."
Jack Antonini, president and CEO of NACUSO, said the trade group has been coordinating with NAFCU in opposing the Durbin amendment. He also offered his own one-liner.
"I believe the 12-cent cap was chosen by anal extraction, not anything logical," he said.