Joint Trades Op-Ed: Durbin Harms Community Banks, Small Business

In a joint op-ed published in Morning Consult today, the heads of several major financial trade associations, including the American Bankers Association, called for the repeal of the Durbin amendment, which imposed government price controls on debit card interchange. The op-ed came ahead of tomorrow’s markup of the Financial Choice Act, which includes a provision to repeal the controversial amendment.

According to data from the Federal Reserve Bank of Richmond, the Durbin amendment has “siphoned upwards of $6 billion to $8 billion a year from the revenue banks and credit unions use to serve their customers and members, respectively,” the groups wrote, totaling $42 billion since it was passed as part of the Dodd-Frank Act in 2010. They pointed out that the amendment has greatly limited banks’ and credit unions’ ability to provide their customers with low-cost financial products and services, and that in the meantime, retailers’ profits have grown.

In addition, they noted that the amendment has done significant harm to small businesses, which have seen increased costs for processing small-dollar transactions and fewer choices for payment processing services since the law took effect. Smaller card issuers have also struggled with added compliance costs and lower revenues as a result of the amendment, and those factors have contributed to an increase in consolidation among banks and credit unions as institutions attempt to “offset the lost interchange revenue with higher fee-generating deposits and other assets that earn income,” the associations said.