In an op-ed published in The Hill today, ATR Federal Affairs Manager Bryan Bashur outlines the issues with the Durbin amendment and why it should not be expanded to credit cards. Currently, the Durbin amendment applies a cap on the interchange fee paid from retailers to banks that issue debit cards.
The cap is nothing more than an artificial price control that has threatened the livelihoods of small financial institutions, restricted consumer access to capital, increased retail prices, and limited options for debit card rewards and promotions.
Instead of passing savings onto consumers, as was intended by introducing the interchange fee cap, retailers have been raising prices. In his piece, Bashur says:
The goal of the amendment was to lower debit card processing costs for retailers so they would lower prices on consumers. In reality, across many sectors of the economy, most retailers either maintained prices or raised prices on consumers following the implementation of the Durbin amendment. As a result of the implementation of the fee cap, very few, only about 1 percent, of retailers actually reduced prices for consumers. Astonishingly, about 22 percent of retailers raised prices on consumers.
Notably, the continuation and expansion of the Durbin amendment has harmed small community banks. Bashur explains that:
Although the Durbin amendment was supposed to have no effect on banks and credit unions with less than $10 billion in assets, this is simply not the case. In fact, the fee cap is harming small community banks and credit unions. Data from the Federal Reserve clearly shows that community banks and credit unions have lost interchange fee revenue since the implementation of the fee cap. Small community banks have seen interchange fees decline by over 20 percent from 2011 to 2019.
The Durbin amendment has also harmed credit unions. Bashur points out that:
Credit unions also lose under the Durbin amendment. According to a 2017 report published by the Credit Union National Association, credit unions lost more than $6.1 billion because of burdensome fee caps. Just like community banks, this is an effective method for eliminating all lines of credit and ensuring that small businesses have no way to sustain themselves, especially through pandemics and economic downturns.
Bashur encourages members of Congress to oppose any legislative initiative that would expand the provisions of the Durbin amendment to apply to credit cards.
Click here to read the full op-ed.