WASHINGTON—Far from increasing credit card competition, the Marshall-Durbin-Gooden-Lofgren interchange bill would hurt consumers and small businesses while benefitting big box retailers, according to a letter to the House and Senate singed by CUNA, the American Association of Credit Union Leagues, and all state leagues and associations.
“CUNA, leagues, and credit unions strongly oppose the bill, and more than 20,000 messages of opposition have been sent to Capitol Hill via CUNA and League action alerts,” CUNA said.
“It would reduce the number of credit card issuers competing for consumers’ business, remove a consumer’s choice of preferred card network, wring out the competitive differences among card products, limit popular credit card rewards programs, and put the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board,” the letter states.
‘The Consequences’
The letter points to what it said are the “consequences” from the Durbin Amendment of more than a decade ago, and warns the bill would be a “costly repeat.”
“The Durbin Amendment resulted in additional compliance burdens and related business costs to credit unions and banks, a reduction in interchange revenue from debit transactions, and a massive transfer of money to the largest retailers,” the letter reads. “Extending this failed policy to credit cards would be disastrous for consumers who rely on credit cards to make life happen, from paying for groceries and school supplies to covering emergency car repairs or medical expenses.
“Accepted nearly everywhere, credit cards offer robust security, fraud protection, and access to credit that may not otherwise be available,” the letter continues. “Interchange fees, which are only a fraction of a cent per dollar transacted, make this possible. Interchange keeps consumers, merchants, and financial institutions safe.”
Additional Arguments Made
Other points made in the letter include:
- Interchange is the cost merchants pay for higher sales, a larger customer base, reduced risk, fewer bounced checks, and guaranteed payments
- The bill would undermine the protections that currently exist—and the will of the consumer—by allowing transactions to be routed through the cheapest networks
- Limiting the ability of the electronic payments system to charge a market rate for the services provided to merchants will result in a loss of small community financial institutions providing card services or force them shift resources
- Driving up the cost of credit by imposing costly burdens on financial institutions could result in “serious harm” to consumers
- An analysis by the Federal Reserve Bank of Richmond “demonstrates why the Durbin Amendment should give pause to any consideration of extending the Durbin Amendment’s routing requirements to lending products accessed by credit cards.”
- The legislation “attempts to solve a problem—an uncompetitive marketplace—that does not exist. Both the U.S. Supreme Court and Consumer Financial Protection Bureau found this is not the case.”
- Restrictions on credit card interchange would take critical resources away from small financial institutions and force them to choose between funding programs to benefit their communities or operating card programs that provide lines of credit to members who would not be able to obtain them otherwise
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