Pro or Con, Durbin Rule Gets Out the Vote

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A reader poll on the effects of the debit interchange cap galvanized both sides of the argument, sparking 10 times American Banker's average response and even a rallying cry over Twitter from the Independent Community Bankers of America.

Hell-bent on delaying the Federal Reserve's cap on interchange, community bankers have insisted that merchants will do everything possible to steer consumers away from using small banks' debit cards — rendering moot an exemption for these institutions.

However, there's a healthy dose of skepticism, at least among American Banker readers, that some of the doomsday scenarios bankers are predicting (such as merchants pitching big-bank cards at the point of sale) will come to pass, according to the recent online poll.

Sixty percent of online voters took the side of industry consultant Andrew Kahr, who wrote in a recent Viewpoint that the Durbin amendment will actually help banks under $10 billion in assets because the regulation exempts them from a pending 12-cent cap on interchange fees.

That compares to 35% of voters who agreed with the banking lobbyists' argument that merchants would discourage use of community banks' cards unless they, too, lowered their interchange fees.

Another 5% of voters said they were too confused by all the noise around the issue to know who was right.

In an e-mail to American Banker, ICBA President and Chief Executive Camden Fine pointed out there are ways (other than outright refusal) merchants can "steer" transactions to the detriment of small banks, including using processing systems to route purchases over lower-priced debit networks. Because the Durbin amendment also includes provisions that require issuers to add more network routing options to their cards and abstain from restricting how merchants route over these networks, the potential risks of this are greater, Fine and others argue.

"The whole issue here is that the merchant — not the bank — gets to pick which electronic 'switch' the transaction will be sent to - thus determining the cost," Fine wrote.

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