By Dean Young
Despite the six years since its passage, the Durbin Amendment remains an active topic of conversation in the payments industry.
The Durbin Amendment was a last minute addition to the Dodd-Frank legislation in 2010, giving the Fed power to regulate debit card interchange fees – the costs retailers pay for processing debit card transactions. The supposed intention behind the bill was to restrict anti-competitive practices and stimulate competition. Retailers assured the public they would pass along savings by lowering prices. However, research shows that a majority of merchants have not lowered their consumer prices following implementation of the Durbin Amendment, failing to pass along the $36 million savings windfall. The result is that merchants have profited since the enactment, while consumers are feeling the pain in their wallets.
The Fed put a cap on the interchange rate that went into effect on Oct. 1, 2011. Many financial institutions have since raised account maintenance and other fees to make up for revenue lost from interchange fees. Credit unions under $10 billion in assets were supposed to be exempt from the Durbin Amendment, yet all have felt the negative impact of the price controls.
What’s the bottom line? Merchants have failed to pass savings on to consumers. Rep. Randy Neugebauer (R-TX) recently introduced legislation that would repeal the cap. According to him, the Durbin amendment artificially shifted more than $30 billion in revenue from one industry to another and was nothing more than a government action to manipulate the marketplace. Representatives from CUNA, NAFCU and several other bank and credit union organizations recently issued a joint letter in support of the legislation to repeal the cap citing its negative impact on consumers.
Great Relief, But...
Congressman Jeb Hensarling, chairman of the House Financial Services Committee, also recently included the repeal of the Durbin Amendment’s federal price controls as part of his outline of the Financial CHOICE Act. If repealed, this would ultimately bring great relief to credit unions and have a positive impact on the credit union industry as a whole.
The debate will likely continue into next year with both Durbin and his opponents vowing to fight on. PSCU is committed to supporting issues impacting all credit unions through collaborative industry advocacy. As the nation’s leading credit union service organization, owned by over 800 member credit unions across the country, PSCU stands firmly behind CUNA, NAFCU and other groups advocating for the repeal of the Durbin amendment on behalf of credit unions and their members.
Dean Young is SVP Industry Engagement with PSCU and leads PSCU’s strategic direction on how to best leverage the cooperative’s scale to advocate on behalf of the credit union industry. He works collaboratively with key national industry partners to ensure there is alignment on hot topics and a cohesive voice.