Durbin Files Second Amicus Brief In Support Of Illinois Interchange Fee Prohibition Act
WASHINGTON – U.S. Senate Democratic Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee and author of the Durbin Amendment, filed an amicus brief in the District Court for the Northern District of Illinois in support of the state’s Interchange Fee Prohibition Act (IFPA), a state law that bars charging interchange fees on the tax and tips portion of credit and debit card transactions. In August 2024, the Illinois Bankers Association filed a lawsuit, Illinois Bankers Association v. Raoul, claiming that the IFPA is preempted by federal law.
Last month, the Illinois Bankers Association filed a motion for summary judgement, in which they argue that the 2010 Durbin Amendment preempts the IFPA from reducing interchange fees below what is outlined in the current regulations. The motion also argues that the IFPA will threaten an alleged “national payments system,” despite there being no such system for credit and debit card transactions.
This amicus brief follows up on another amicus brief that Durbin filed in October 2024 in the case, arguing that the Durbin Amendment does not preempt the IFPA.
The amicus brief states, “As Senator Durbin noted in the amicus brief that he filed on October 4, 2024, (Dkt. 71) and as the Court explained in its Memorandum Opinion and Order on December 20, 2024 (Dkt. 104), the Plaintiffs’ claim that the IFPA is inconsistent with and thus preempted by the Durbin Amendment lacks merit. As the Court observed, ‘there is no such ‘inconsistency’ between the IFPA and the Durbin Amendment because the Durbin Amendment and its implementing regulation only creates a ceiling for interchange fees’ and the IFPA respects that ceiling.”
“The IFPA respects and in no way contravenes the ceiling that the Durbin Amendment and Regulation II established, and the IFPA fully aligns with the Durbin Amendment’s text, its structure, and its goal of constraining network-fixed debit interchange fees to reduce excessively high fee rates,” the amicus brief states.
The amicus brief continues, “Because all card-issuing banks follow the fee schedules Visa and Mastercard set, to make reform work across participants in the Visa and Mastercard systems, all that must be done is to obligate the card network companies to change their fee schedules, as the IFPA would do. The IFPA’s application to card network companies also does not, as the OCC stated in its brief, ‘undermine the uniformity necessary for the smooth and effective functioning of the national payment system.’”
The amicus brief concludes, “In short, the sky will not fall and the card transaction system will not fail should the IFPA take effect and apply to card networks on July 1, but that day will mark an important change as merchants and their customers will finally start to see urgently-needed relief from the excessive interchange fees that Visa and Mastercard impose.”
Durbin’s amicus brief to the District Court for the Northern District of Illinois can be read in full here.
Durbin has made it a priority to protect consumers. In 2010, Congress passed the Dodd-Frank Act, containing the Durbin Amendment, which reduced Visa and Mastercard’s excessively high debit card fees. The Durbin Amendment established a rate ceiling for large card-issuing banks, not a uniform standard. Reg II, which is the regulation that implements the Durbin Amendment, is explicit that payment card networks may establish interchange rates that are lower than the ceiling, including by eliminating the five basis point component of the fee rate. It is consistent with the Durbin Amendment for a state law, such as the IFPA, to regulate debit interchange fee amounts as long as it does not allow issuers to receive rates that exceed the maximum amount.
Durbin has expanded his efforts to curb Visa and Mastercard’s duopoly by introducing the bipartisan Credit Card Competition Act, which would enhance competition and choice in the credit card network market. Building off of debit card competition reforms under the Durbin Amendment, the Credit Card Competition Act would direct the Federal Reserve to ensure that the largest credit card-issuing banks offer a choice of at least two networks, one of which must be a network other than Visa and Mastercard, over which an electronic credit transaction may be processed.
Visa and Mastercard wield enormous market power in credit cards; according to the Federal Reserve, they account for nearly 576 million cards, or about 83 percent of general-purpose credit cards. Visa’s and Mastercard’s market power and network structure have enabled them to impose fees on U.S. merchants that are among the world’s highest, charging more than $100 billion in U.S. merchant credit card fees in 2023. These fees include interchange fees which Visa and Mastercard require merchants to pay to issuing banks, as well as network fees that Visa and Mastercard require merchants to pay directly to them. Consumers ultimately pay for all of these fees in the price of the goods and services they buy.
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