CU and Bank Trades Call for the Repeal of the Durbin Amendment

In a joint op-ed published in Morning Consult, the heads of seven financial trade associations called for the repeal of the Durbin amendment, which imposed government price controls on debit card interchange.

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. The trade groups 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.

The House Financial Services Committee will start today to mark-up the Financial CHOICE Act (H.R. 10), which includes an amendment to repeal the Durbin Amendment.

Read the op-ed.

Interchange Brief Filed by Bank and CU Groups

Bank and credit union trade groups yesterday filed a “friend of the court” brief urging Judge Richard Leon not to order the Federal Reserve to issue an interim rule on interchange.

The groups argued that Leon has no legal authority to order the Federal Reserve Board to conduct rulemaking. Even if he did, they said, “a rush to issue a new rule will harm all affected interests, including consumers, and threaten the effective functioning, stability, and security of the electronic debit card payments system.”

Finally, they said, an interim rule would invite further legal challenges from the Fed or issuers who could contest “the confiscatory nature of an interim interchange fee rule.”

Leon ruled last month that the Fed’s rule violated congressional intent in the Dodd-Frank Act by setting the interchange fee cap too high and failing to allow merchants to choose multiple unaffiliated PIN and signature networks for each card transaction they process.

Read the brief.

Community Banks and Credit Unions Are Feeling the Impact of Durbin

A legislative provision meant to protect debit card revenues for small banks and credit unions does not appear to be working as well as lawmakers had expected.

Read the Washington Post article.

Fed's Debit Proposal Will Adversely Impact Smaller Credit Unions

NCUA released a letter from NCUA Chairman Debbie Matz to Federal Reserve Chairman Ben Bernanke on the impact of the Fed's proposed debit interchange rule on credit unions.

Based on data collected in March and analysis on the direct cost and income from debit card transactions for credit unions of different sizes, NCUA requested the Federal Reserve modify the proposed rule to provide meaningful exemptions for small card issuers related to network exclusivity and merchant routing.

The proposed Federal Reserve rule would cap debit intechange fees to 12 cents per transaction for institutions with $10 billion or more in assets. NCUA contends that the prohibitions on network exclusivity and merchant routing would significantly disadvantage smaller institutions.

NCUA reviewed data from 296 credit unions. NCUA found that the direct cost per debit transaction does not fall below the 12 cents proposed by the rule until a credit union reached $100 million to $500 million in assets size. The median direct cost per transaction was 31 cents, 21 cents, and 19 cents for credit unions under $10 million in assets, between $10 million and $50 million, and between $50 million and $100 million in assets, respectively.

Additionally, more than one-third of the credit unions currently report losing money on debit interchange programs before the Fed's rule becomes effective. This would likely increase if the 12 cent cap goes into effect.

The Credit Union National Association stated that it believed the cost estimates for large credit unions' debit transactions were "incredibly understated" by NCUA.

Read the letter.

Stop the Debit Card Rule

What does ABA, CUNA, ICBA, and NAFCU have in common?

We've all joined together to fight the Durbin Amendment, which authorizes the Federal Reserve to set the rate of the interchange fee.

If the Federal Reserve sets the rate too low, it will mean that community banks and credit unions will be harmed and will be forced to make up for lost revenue by

Eliminating free checking

Charging for online banking

Eliminating or charging for rewards programs

Annual fees for debit cards

Check out video.


Go to stopthedebitcardrule.com to find out more.