May 14, 2010
The letters follow the passage of an amendment Durbin proposed which would address the high interchange swipe fees and anti-competitive restrictions that credit card networks impose on small businesses. Durbin’s amendment passed with broad bipartisan support late yesterday.
“Your associations have urged your member institutions to oppose my amendments using a variety of scare tactics,” Durbin wrote. “I will tell you what I have told small banks and credit unions in my home state of Illinois - that my amendment does not disadvantage small banks and credit unions, and in fact goes to great lengths to protect their ability to successfully compete with big banks in offering payment cards to consumers. I urge you to accurately represent to your members what my amendment does, and to clarify any misimpressions of what it does not do.”
The banking associations have repeatedly and incorrectly stated that Durbin’s amendment would disproportionately hurt their members. In fact, the Durbin amendment exempts over 99% of banks in the country and instead focuses on only large institutions – those with more than $10 billion in assets. Durbin’s letter sets the record straight on what his amendment does and does not do.
An estimated $48 billion in swipe fees were charged by credit and debit card networks in 2008 – this money came out of the bottom line of small businesses and consumers across America, and 80% of this money went to just ten large banks.
A copy of Durbin’s letter appears below:
May 14, 2010
Camden Fine
President and CEO
Independent Community Bankers of America
Dan Mica
President and CEO
Credit Union National Association
Dear Mr. Fine and Mr. Mica,
I write to express my disappointment with the position your associations have taken on an amendment I successfully offered in the United States Senate to address the high interchange swipe fees and anti-competitive restrictions that credit card networks impose on small businesses.
This amendment passed the Senate yesterday in a broad bipartisan vote. However, your associations have urged your member institutions to oppose the provision using a variety of scare tactics. For example, you stated in a May 12 letter that my amendment will “significantly harm thousands of community banks and credit unions that offer debit and credit cards to their customers and members.”
I will tell you what I have told small banks and credit unions in my home state of Illinois - that my amendment does not disadvantage small banks and credit unions, and in fact goes to great lengths to protect their ability to successfully compete with big banks in offering payment cards to consumers.
One of the key provisions in my amendment is its requirement that the interchange transaction fees charged to merchants on debit card transactions must be reasonable and proportional to processing costs. Currently Visa and MasterCard, which control nearly the entire debit card market, set unreasonably high debit interchange fee rates that bear no relation to costs. These fees are paid to card-issuing banks, and all banks receive the same fee rates no matter how efficiently or inefficiently a particular bank handles transactions. Debit interchange fees are deducted from the transaction amount, meaning that they come out of the bottom line of every small business and merchant that accepts cards.
As you know, my amendment exempts all banks and credit unions with assets of less than $10 billion dollars from this reasonable debit fee requirement. Over 99 percent of all banks and credit unions in America fall within this exemption. This exemption means that Visa and MasterCard can continue to set the same debit interchange rates for small banks as they do today, and therefore the banks would not lose a dime of interchange revenue that they currently receive.
Another part of my amendment prevents card networks like Visa and MasterCard from contractually restricting merchants’ ability to offer certain discounts to customers. There are only two types of discounts which my amendment addresses: discounts between one card network versus another (e.g., Visa vs. MasterCard), and discounts between one form of payment versus another (e.g., debit cards vs. credit cards).
In no way does my amendment authorize merchants to differentiate between cards on the basis of the bank that issued the card. In fact, Visa and MasterCard both currently have “honor all cards” policies which require merchants to accept any Visa or MasterCard presented to them regardless of the issuing bank. My amendment leaves these “honor all cards” policies intact. It is neither the intent nor the effect of my amendment to “encourage big retailers to enter into sweetheart acceptance deals that discriminate against community bank and credit union cardholders,” as you stated in your May 12 letter.
Finally, my amendment would prevent card networks like Visa and MasterCard from threatening to punish merchants who set a minimum dollar value for acceptance of credit cards. For many small businesses, credit card interchange fees currently exceed profit margins for low-dollar sales. My amendment would permit merchants to set minimum acceptance amounts for credit cards, but only for credit cards as an entire form of payment. In other words, a merchant would not under my amendment be authorized to set a minimum amount for acceptance of small bank credit cards while having no minimum for acceptance of big bank cards.
In your May 12 letter, you also raise the concern that despite my amendment’s protections for small banks and credit unions, nothing in my amendment would stop Visa and MasterCard from applying lowered interchange rates to all card issuers regardless of size. This concern highlights exactly the problem my amendment seeks to address: the unrestrained power of Visa and MasterCard to set the fees and rules that govern the debit and credit card industries. Visa and MasterCard already can unilaterally change their interchange rates or network rules any time they want to, and they do so whenever it profits them. This system has allowed Visa and MasterCard to establish unreasonable fees and anti-competitive rules against which small businesses, merchants and even government agencies are unable to fight back. My amendment takes measured steps to rein in these unreasonable fees and anti-competitive rules, and does so in a way that takes every precaution to protect your member institutions.
I urge you to accurately represent to your members what my amendment does, and to clarify any misimpressions of what it does not do. Despite your associations’ opposition to my amendment, with which many of your own members strongly disagree, I look forward to continuing to work with small banks and credit unions both in Illinois and across the country.
Sincerely,
Richard J. Durbin
United States Senator
Durbin to Banking Associations: Your Members Deserve an Accurate Representation of My Swipe Fee Amendment
[WASHINGTON, D.C.] – Assistant Senate Majority Leader Dick Durbin (D-IL) sent a letter to the Independent Community Bankers of America and the Credit Union National Association today, expressing disappointment with the two large banking associations and urging a change of course in their tactics and message to their membership.The letters follow the passage of an amendment Durbin proposed which would address the high interchange swipe fees and anti-competitive restrictions that credit card networks impose on small businesses. Durbin’s amendment passed with broad bipartisan support late yesterday.
“Your associations have urged your member institutions to oppose my amendments using a variety of scare tactics,” Durbin wrote. “I will tell you what I have told small banks and credit unions in my home state of Illinois - that my amendment does not disadvantage small banks and credit unions, and in fact goes to great lengths to protect their ability to successfully compete with big banks in offering payment cards to consumers. I urge you to accurately represent to your members what my amendment does, and to clarify any misimpressions of what it does not do.”
The banking associations have repeatedly and incorrectly stated that Durbin’s amendment would disproportionately hurt their members. In fact, the Durbin amendment exempts over 99% of banks in the country and instead focuses on only large institutions – those with more than $10 billion in assets. Durbin’s letter sets the record straight on what his amendment does and does not do.
An estimated $48 billion in swipe fees were charged by credit and debit card networks in 2008 – this money came out of the bottom line of small businesses and consumers across America, and 80% of this money went to just ten large banks.
A copy of Durbin’s letter appears below:
May 14, 2010
Camden Fine
President and CEO
Independent Community Bankers of America
Dan Mica
President and CEO
Credit Union National Association
Dear Mr. Fine and Mr. Mica,
I write to express my disappointment with the position your associations have taken on an amendment I successfully offered in the United States Senate to address the high interchange swipe fees and anti-competitive restrictions that credit card networks impose on small businesses.
This amendment passed the Senate yesterday in a broad bipartisan vote. However, your associations have urged your member institutions to oppose the provision using a variety of scare tactics. For example, you stated in a May 12 letter that my amendment will “significantly harm thousands of community banks and credit unions that offer debit and credit cards to their customers and members.”
I will tell you what I have told small banks and credit unions in my home state of Illinois - that my amendment does not disadvantage small banks and credit unions, and in fact goes to great lengths to protect their ability to successfully compete with big banks in offering payment cards to consumers.
One of the key provisions in my amendment is its requirement that the interchange transaction fees charged to merchants on debit card transactions must be reasonable and proportional to processing costs. Currently Visa and MasterCard, which control nearly the entire debit card market, set unreasonably high debit interchange fee rates that bear no relation to costs. These fees are paid to card-issuing banks, and all banks receive the same fee rates no matter how efficiently or inefficiently a particular bank handles transactions. Debit interchange fees are deducted from the transaction amount, meaning that they come out of the bottom line of every small business and merchant that accepts cards.
As you know, my amendment exempts all banks and credit unions with assets of less than $10 billion dollars from this reasonable debit fee requirement. Over 99 percent of all banks and credit unions in America fall within this exemption. This exemption means that Visa and MasterCard can continue to set the same debit interchange rates for small banks as they do today, and therefore the banks would not lose a dime of interchange revenue that they currently receive.
Another part of my amendment prevents card networks like Visa and MasterCard from contractually restricting merchants’ ability to offer certain discounts to customers. There are only two types of discounts which my amendment addresses: discounts between one card network versus another (e.g., Visa vs. MasterCard), and discounts between one form of payment versus another (e.g., debit cards vs. credit cards).
In no way does my amendment authorize merchants to differentiate between cards on the basis of the bank that issued the card. In fact, Visa and MasterCard both currently have “honor all cards” policies which require merchants to accept any Visa or MasterCard presented to them regardless of the issuing bank. My amendment leaves these “honor all cards” policies intact. It is neither the intent nor the effect of my amendment to “encourage big retailers to enter into sweetheart acceptance deals that discriminate against community bank and credit union cardholders,” as you stated in your May 12 letter.
Finally, my amendment would prevent card networks like Visa and MasterCard from threatening to punish merchants who set a minimum dollar value for acceptance of credit cards. For many small businesses, credit card interchange fees currently exceed profit margins for low-dollar sales. My amendment would permit merchants to set minimum acceptance amounts for credit cards, but only for credit cards as an entire form of payment. In other words, a merchant would not under my amendment be authorized to set a minimum amount for acceptance of small bank credit cards while having no minimum for acceptance of big bank cards.
In your May 12 letter, you also raise the concern that despite my amendment’s protections for small banks and credit unions, nothing in my amendment would stop Visa and MasterCard from applying lowered interchange rates to all card issuers regardless of size. This concern highlights exactly the problem my amendment seeks to address: the unrestrained power of Visa and MasterCard to set the fees and rules that govern the debit and credit card industries. Visa and MasterCard already can unilaterally change their interchange rates or network rules any time they want to, and they do so whenever it profits them. This system has allowed Visa and MasterCard to establish unreasonable fees and anti-competitive rules against which small businesses, merchants and even government agencies are unable to fight back. My amendment takes measured steps to rein in these unreasonable fees and anti-competitive rules, and does so in a way that takes every precaution to protect your member institutions.
I urge you to accurately represent to your members what my amendment does, and to clarify any misimpressions of what it does not do. Despite your associations’ opposition to my amendment, with which many of your own members strongly disagree, I look forward to continuing to work with small banks and credit unions both in Illinois and across the country.
Sincerely,
Richard J. Durbin
United States Senator