06.11.10
“I write to express my disappointment at the claims your associations continue to make in your efforts to block reasonable regulation of the interchange fee system,” Durbin wrote. “…The reality of your argument against my amendment seems to be that you are so fearful of Visa, MasterCard and their big bank allies that you do not believe you can support any regulation of the interchange system, no matter how reasonable.”
Both ICBA and CUNA have repeatedly and falsely claimed that Durbin’s proposed reforms to the interchange system would reduce rates for small financial institutions – even though 99% of all banks and credit unions are exempt from his proposed legislation.
“[T]he idea that Visa and MasterCard will drive small banks away from offering debit cards by voluntarily and unilaterally reducing debit interchange rates for small financial institutions -- even though such action would be contrary to their own economic interests and negatively affect a multi-billion dollar annual revenue stream – is absurd,” Durbin wrote. “Even corporate spite has some boundaries, and sacrificing revenues seems inconsistent with the profit-driven actions that Visa and MasterCard have taken to date.”
ICBA and CUNA also wrongly argue that merchants would be able to discriminate against their members by refusing to honor small bank and credit union cards or by offering discounts for use of big bank cards.
“[M]y amendment does not allow discrimination by merchants against issuers of debit cards. As is the case today, under my amendment a merchant who accepts Visa debit cards from large banks would be required to accept Visa debit cards from small banks and credit unions as well,” continued Durbin. “They would also be prohibited from offering discounts for large bank cards and not providing the same discount for small bank cards from the same network.”
A bipartisan group of 64 Senators voted in favor of Durbin’s amendment to the Wall Street reform bill which passed that body last month. Durbin’s language would direct the Fed to ensure that the interchange fees received by the largest 1% of banks are “reasonable and proportional” to the cost of processing a debit card transaction, and would prohibit card networks like Visa and MasterCard from penalizing sellers for offering discounts to customers.
A copy of today’s letter is included below.
June 11, 2010
Mr. Camden Fine
President and CEO
Independent Community Bankers of America
Mr. Dan Mica
President and CEO
Credit Union National Association
Dear Mr. Fine and Mr. Mica:
I write to express my disappointment at the claims your associations continue to make in your efforts to block reasonable regulation of the interchange fee system.
Nearly $50 billion are collected each year in credit and debit card interchange fees. This interchange fee system is entirely unregulated. Visa and MasterCard, which thoroughly dominate the credit and debit card industries, establish the interchange fee rates that all merchants (and, by extension, their customers) pay to the banks that issue their cards. There is virtually no competition and no recourse for merchants exploited by the rate structure and fees mandated by Visa and MasterCard.
The arguments that your associations are advancing seems to boil down to the following:
First, the idea that Visa and MasterCard will drive small banks away from offering debit cards by voluntarily and unilaterally reducing debit interchange rates for small financial institutions -- even though such action would be contrary to their own economic interests and negatively affect a multi-billion dollar annual revenue stream – is absurd. Even corporate spite has some boundaries, and sacrificing revenues seems inconsistent with the profit-driven actions that Visa and MasterCard have taken to date.
To the second point, my amendment does not allow discrimination by merchants against issuers of debit cards. As is the case today, under my amendment a merchant who accepts Visa debit cards from large banks would be required to accept Visa debit cards from small banks and credit unions as well. They would also be prohibited from offering discounts for large bank cards and not providing the same discount for small bank cards from the same network.
Senators voted for this amendment because they know the current interchange system is unsustainable for America’s business and consumers, as well as America’s charities, government agencies, public transit authorities, universities, Indian tribes, and other entities that accept cards as a form of payment and that are being crushed by rising interchange fees. For example, last year the City of Chicago paid $7.5 million in interchange fees, and the Illinois Tollway paid $11.6 million in interchange fees. Our budget-strapped cities and transit agencies could put their taxpayer dollars to far better use.
The reality of your argument against my amendment seems to be that you are so fearful of Visa, MasterCard and their big bank allies that you do not believe you can support any regulation of the interchange system, no matter how reasonable. You are afraid to take what you perceive to be the risk that these giant corporations might punish you for disagreeing with them. In short, you are concerned that Visa, MasterCard and their big bank allies may choose to use their market power against you.
Ironically, that is the world in which small businesses, merchants and other accepters of payment cards live today. The card networks and big banks have already chosen to wield their market power to the disadvantage of those who have no choice but to accept their cards. Small banks should understand the predicament that their colleagues in the small business community face, as both live in a world that is too all often run by the card networks and the big banks. Visa and MasterCard can unilaterally reduce interchange fees on credit unions and banks now, and my amendment wouldn't change that. It is this market domination that needs to change.
Change is coming to the interchange fee system. This change will be good for consumers, good for small businesses, good for taxpayers, and good for the American economy. I have worked hard to ensure that this change will benefit you. I am sorry that you continue to stand with the big banks and the giants of the credit card industry in opposing reasonable reform.
Sincerely,
Richard J. Durbin
United States Senator
Durbin Corrects Banking Lobby's Arguments on Interchange... Again
[WASHINGTON, D.C.] – In a letter today to the CEO’s of the Independent Community Bankers of America (ICBA) and the Credit Union Nation Association (CUNA), Assistant Senate Majority Leader Dick Durbin (D-IL) again corrected arguments the two financial service associations have made against his reasonable reforms of the interchange fee system.“I write to express my disappointment at the claims your associations continue to make in your efforts to block reasonable regulation of the interchange fee system,” Durbin wrote. “…The reality of your argument against my amendment seems to be that you are so fearful of Visa, MasterCard and their big bank allies that you do not believe you can support any regulation of the interchange system, no matter how reasonable.”
Both ICBA and CUNA have repeatedly and falsely claimed that Durbin’s proposed reforms to the interchange system would reduce rates for small financial institutions – even though 99% of all banks and credit unions are exempt from his proposed legislation.
“[T]he idea that Visa and MasterCard will drive small banks away from offering debit cards by voluntarily and unilaterally reducing debit interchange rates for small financial institutions -- even though such action would be contrary to their own economic interests and negatively affect a multi-billion dollar annual revenue stream – is absurd,” Durbin wrote. “Even corporate spite has some boundaries, and sacrificing revenues seems inconsistent with the profit-driven actions that Visa and MasterCard have taken to date.”
ICBA and CUNA also wrongly argue that merchants would be able to discriminate against their members by refusing to honor small bank and credit union cards or by offering discounts for use of big bank cards.
“[M]y amendment does not allow discrimination by merchants against issuers of debit cards. As is the case today, under my amendment a merchant who accepts Visa debit cards from large banks would be required to accept Visa debit cards from small banks and credit unions as well,” continued Durbin. “They would also be prohibited from offering discounts for large bank cards and not providing the same discount for small bank cards from the same network.”
A bipartisan group of 64 Senators voted in favor of Durbin’s amendment to the Wall Street reform bill which passed that body last month. Durbin’s language would direct the Fed to ensure that the interchange fees received by the largest 1% of banks are “reasonable and proportional” to the cost of processing a debit card transaction, and would prohibit card networks like Visa and MasterCard from penalizing sellers for offering discounts to customers.
A copy of today’s letter is included below.
June 11, 2010
Mr. Camden Fine
President and CEO
Independent Community Bankers of America
Mr. Dan Mica
President and CEO
Credit Union National Association
Dear Mr. Fine and Mr. Mica:
I write to express my disappointment at the claims your associations continue to make in your efforts to block reasonable regulation of the interchange fee system.
Nearly $50 billion are collected each year in credit and debit card interchange fees. This interchange fee system is entirely unregulated. Visa and MasterCard, which thoroughly dominate the credit and debit card industries, establish the interchange fee rates that all merchants (and, by extension, their customers) pay to the banks that issue their cards. There is virtually no competition and no recourse for merchants exploited by the rate structure and fees mandated by Visa and MasterCard.
The arguments that your associations are advancing seems to boil down to the following:
1)
You argue that Visa and MasterCard will reduce debit interchange rates
for small financial institutions (even though small banks and
credit unions are specifically exempted from such rate regulation in
the legislation). You say such reductions would harm the ability of
these banks and credit unions to offer debit cards or force them to
raise rates or impose additional fees on debit card users.
2)
You further argue that under the Durbin provision, if Visa and
MasterCard did not reduce debit interchange rates for small banks and
credit unions, merchants would be able to discriminate against these
small institutions by refusing to honor small bank cards or offering
discounts for use of big bank cards.
These assertions are untrue. First, the idea that Visa and MasterCard will drive small banks away from offering debit cards by voluntarily and unilaterally reducing debit interchange rates for small financial institutions -- even though such action would be contrary to their own economic interests and negatively affect a multi-billion dollar annual revenue stream – is absurd. Even corporate spite has some boundaries, and sacrificing revenues seems inconsistent with the profit-driven actions that Visa and MasterCard have taken to date.
To the second point, my amendment does not allow discrimination by merchants against issuers of debit cards. As is the case today, under my amendment a merchant who accepts Visa debit cards from large banks would be required to accept Visa debit cards from small banks and credit unions as well. They would also be prohibited from offering discounts for large bank cards and not providing the same discount for small bank cards from the same network.
Senators voted for this amendment because they know the current interchange system is unsustainable for America’s business and consumers, as well as America’s charities, government agencies, public transit authorities, universities, Indian tribes, and other entities that accept cards as a form of payment and that are being crushed by rising interchange fees. For example, last year the City of Chicago paid $7.5 million in interchange fees, and the Illinois Tollway paid $11.6 million in interchange fees. Our budget-strapped cities and transit agencies could put their taxpayer dollars to far better use.
The reality of your argument against my amendment seems to be that you are so fearful of Visa, MasterCard and their big bank allies that you do not believe you can support any regulation of the interchange system, no matter how reasonable. You are afraid to take what you perceive to be the risk that these giant corporations might punish you for disagreeing with them. In short, you are concerned that Visa, MasterCard and their big bank allies may choose to use their market power against you.
Ironically, that is the world in which small businesses, merchants and other accepters of payment cards live today. The card networks and big banks have already chosen to wield their market power to the disadvantage of those who have no choice but to accept their cards. Small banks should understand the predicament that their colleagues in the small business community face, as both live in a world that is too all often run by the card networks and the big banks. Visa and MasterCard can unilaterally reduce interchange fees on credit unions and banks now, and my amendment wouldn't change that. It is this market domination that needs to change.
Change is coming to the interchange fee system. This change will be good for consumers, good for small businesses, good for taxpayers, and good for the American economy. I have worked hard to ensure that this change will benefit you. I am sorry that you continue to stand with the big banks and the giants of the credit card industry in opposing reasonable reform.
Sincerely,
Richard J. Durbin
United States Senator
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