Financial industry groups unite to oppose flawed interchange regulations

Ahead of a hearing in the Senate Judiciary Committee on credit and debit card interchange fees, ABA joined with a broad coalition of industry groups to communicate to lawmakers the serious flaws of interchange regulations and push back against efforts to expand the Durbin amendment. Instead, the groups called for a full repeal of the Durbin amendment, which they said has only led to higher costs for consumers and small businesses.

“Study after study has found that the Durbin Amendment has failed to lower retail prices as merchants promised and as time goes on, an increasing number of smaller banks and credit unions will be subject to its rules because its thresholds weren’t indexed for inflation,” the groups said in a statement submitted for the record. “Repealing this law will prevent these harms from continuing to mount and will restore a fully functioning market for checking accounts.”

The trade groups also emphasized that the Durbin amendment should not be extended to apply to credit transactions—and warned that doing so would have “a dramatic effect on consumer protections and services associated with the credit card products that are overwhelmingly popular with the American public.” They also urged the Federal Reserve to not move ahead with its proposal to extend Regulation II—Durbin’s implementing regulation—to expand its provisions to virtually any type of debit transaction.

Finally, the groups called on lawmakers to examine how certain bank software and payments processors have consolidated and are now “using the Durbin amendment as cover to coerce small banks and credit unions into using transaction services that may harm their sustainability as independent institutions.” Read the joint statement for the record.

In addition to the statement for the record, ABA also joined with seven other financial industry groups in a letter to Judiciary Committee Chairman Dick Durbin (D-Ill.) and Ranking Member Chuck Grassley (R-Iowa) pushing back vigorously against expanding the law.

“Legislation in this space is unnecessary because the payments industry is more competitive than ever, with new players entering all the time, giving consumers and merchants a range of options,” the groups said. “For example, retailers have rushed to offer Buy Now Pay Later products for which they pay  substantially more (as much as 6 percent) than for payment cards. The free market is working, and suggestions that government intervention is needed do not stand up to scrutiny.”

In another letter with 51 state bankers associations, ABA told Durbin and Grassley that more than a decade after the Durbin amendment took effect, “it is clear that interchange caps and routing mandates have hurt consumers, small businesses, and financial institutions by reducing choice, increasing costs, and reducing access to credit. Congress should act swiftly to repeal the Durbin Amendment, not expand its scope.”