ABA leads opposition to ‘deeply flawed’ effort to expand Durbin routing provisions to credit cards

The American Bankers Association joined with eight other financial services trade groups in united opposition to a bill introduced today by Sens. Roger Marshall (R-Kan.) and Dick Durbin (D-Ill.) that would create new mandates on many banks that issue credit cards.

The bill would require covered credit card issuers to add a second network to their customers’ cards, but banks would only be allowed to choose from certain options set by the Fed. In this regard, the bill goes further than the rules were put in place for debit card transactions under the Dodd-Frank Act’s Durbin Amendment in 2010, where a bank could choose any two unaffiliated networks. Another new provision of the bill not found in the Durbin Amendment is a requirement that banks accept virtually any kind of transaction, functionally requiring banks to onboard potentially many more than two networks.  Fed research shows that the Durbin Amendment had a negative impact on community banks and no demonstrated cost savings for consumers.

In their statement, the trade groups raised concerns that the new mandates would fall “disproportionately” on small card issuers, including community banks. “The proposed legislation is a clear attempt to secure yet another windfall for the largest multinational retailers and e-commerce giants at the expense of the security of the payments ecosystem and the financial health of everyday Americans,” the groups said, highlighting that not all networks provide the same level of security, resilience and fraud protection. “Consumers will pay the price, while many small issuers will be forced to exit the credit card business altogether. Senators Marshall and Durbin should not reengineer the entire payments system just to benefit a small group of the largest retailers while causing smaller financial institutions and their customers to suffer.”

The Kansas Bankers Association also issued a joint statement with the Community Bankers of Kansas panning the bill. KBA President and CEO Doug Wareham called it “an unwarranted attack on the freedom of private sector banks to engage with financial service partners that bring the greatest value, widest array of benefits and strongest financial security to their credit card customers.”

“This proposal will impose enormous costs on Kansas banks, including many community banks that will be forced to pay for rewiring how credit cards are processed, and it will jeopardize the ability of those same community banks to offer loyalty and reward cards that tens of thousands of Kansans enjoy and benefit from,” Wareham added. “If enacted, this legislation will drive small community banks from this marketplace and further trigger community bank consolidation.”