May 27, 2010
“It appears that in an effort to frighten small banks and credit unions into opposing the amendment, your companies are threatening to make changes to your small bank interchange fee rates and to your network operating rules. These changes, which are not in any way required by the amendment, are unnecessary and would disadvantage small card-issuing institutions … The simple fact is that small banks would not be harmed or punished under the amendment unless your companies decide to harm or punish them.
Further, I warn you that if your companies coordinate with each other or with your largest member banks to make changes to your fees and rules, it would raise serious concerns that you are engaging in an unlawful restraint of trade.
I urge you to commit that if this amendment becomes law, you will not take purposefully steps to disadvantage small issuers,” Durbin wrote.
Both Visa and MasterCard have repeatedly and incorrectly claimed that the Durbin amendment would harm community banks and credit unions. In fact, the amendment goes to great lengths to protect the rights of small financial institutions, exempting all but the largest 1% of banks and credit unions from the amendment’s debit fee regulations.
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 merchants across America, and 80 percent of this money went to just ten large banks.
A copy of today’s letter appears below:
May 27, 2010
Joseph Saunders
Chairman and Chief Executive Officer
Visa Inc.
P.O. Box 8999
San Francisco, CA 94128-8999
Robert Selander
Chief Executive Officer
MasterCard Worldwide
2000 Purchase St.
Purchase, NY 10577-2509
Dear Mr. Saunders and Mr. Selander:
I write in regard to the unfortunate coordinated campaign your companies have launched distorting the impact of my recently-passed interchange amendment on small banks and credit unions.
It appears that, in an effort to frighten small banks and credit unions into opposing the amendment, your companies are threatening to make changes to your small bank interchange fee rates and to your network operating rules. These changes, which are not in any way required by the amendment, are unnecessary and would disadvantage small card-issuing institutions.
I ask you each to state unequivocally that you are neither threatening nor planning to take steps that would purposefully disadvantage small institutions, should the amendment become law. Further, I warn you that if your companies coordinate with each other or collude with your largest member banks to make changes to your fees and rules, it would raise serious concerns that you are engaging in an unlawful restraint of trade.
The amendment I offered, which was passed by the Senate in a bipartisan vote of 64-33, would establish a reasonable interchange fee standard for transactions involving debit cards issued by banks with assets of over $10 billion. The amendment would also prevent your companies from punishing merchants who provide discounts to customers for use of a particular card network (e.g., Visa vs. MasterCard) or a particular form of payment (e.g., cash vs. debit card vs. credit card), or who set minimum or maximum dollar thresholds for use of a credit card.
This language was carefully drafted in order to avoid creating any disadvantage for small banks and credit unions, and I went to great lengths to protect the ability of these small institutions to successfully compete with big banks in offering payment cards to consumers.
As you know, the amendment does not in any way require changes to the interchange fee rates that your companies have established for small banks and credit unions. In fact, 99% of all U.S. financial institutions are exempted from the amendment’s debit fee regulations.
Nor does the provision in any way permit merchants to discriminate against cards issued by small issuers. It does not touch your current network operating rules that require that cards be honored in the same way regardless of the identity of the bank that issued the card.
The only way that small banks or credit unions could experience interchange rate reductions or be discriminated against is if your companies decide to cut small bank interchange rates and rescind your operating rules that currently prohibit discrimination between card-issuing banks. Sadly, it appears from your companies’ public statements and other communications that you are contemplating just such steps.
In a May 20 statement, Visa charged that the amendment “could especially harm community banks and credit unions that depend on interchange to offer competitive banking services to firefighters, police officers, teachers, veterans, congressional staffers and other customers.” Also in a May 20 statement, MasterCard said the amendment will "punish banks on Main Street because the ‘carve-out’ for banks with assets below $10 billion is a sham.” The simple fact is, however, that small banks would not be harmed or punished under the amendment unless your companies decide to harm or punish them.
If your companies were to coordinate such punitive actions in the same way that you appear to have coordinated your messaging tactics, serious concerns would be raised that you are engaging in an unlawful restraint of trade. Further, I would caution you not to collude with your largest member banks to change your fees and rules in an effort to protect the big banks against competition from smaller card-issuing banks. Such steps would also raise serious antitrust concerns.
I know that your companies strongly oppose the amendment that was adopted by the Senate, and I am not surprised by your opposition. The provision would correct anti-competitive aspects of a system that has brought enormous revenue to your companies and to the largest banks at the expense of America’s small businesses and consumers. Nevertheless, I urge you to commit that if this amendment becomes law, you will not take steps to purposefully disadvantage small issuers. By making such a commitment, you will provide much-needed reassurance that you are not attempting to protect the biggest banks you serve by threatening the smallest.
Please respond in writing to this letter by June 14. I look forward to receiving your responses.
Sincerely,
Richard J. Durbin
United States Senator
cc: The Credit Union National Association
The Independent Community Bankers of America
The National Association of Federal Credit Unions
The American Bankers Association
The Financial Services Roundtable
The Community Bankers Association of Illinois
The Illinois Bankers Association
The Illinois Credit Union League
Durbin to Visa and MasterCard: Stop Threatening Small Banks
[WASHINGTON, D.C.] – In a strongly worded letter to the CEOs of Visa and MasterCard, Assistant Senate Majority Leader Dick Durbin (D-IL) told the credit card giants to stop threatening small banks with interchange fee changes and to commit not to take any steps that would purposefully disadvantage small card issuers. Visa and MasterCard began making these threats after Durbin successfully added a bipartisan amendment to the Wall Street reform bill to help reduce the interchange fees that small businesses pay on every credit and debit card sale.“It appears that in an effort to frighten small banks and credit unions into opposing the amendment, your companies are threatening to make changes to your small bank interchange fee rates and to your network operating rules. These changes, which are not in any way required by the amendment, are unnecessary and would disadvantage small card-issuing institutions … The simple fact is that small banks would not be harmed or punished under the amendment unless your companies decide to harm or punish them.
Further, I warn you that if your companies coordinate with each other or with your largest member banks to make changes to your fees and rules, it would raise serious concerns that you are engaging in an unlawful restraint of trade.
I urge you to commit that if this amendment becomes law, you will not take purposefully steps to disadvantage small issuers,” Durbin wrote.
Both Visa and MasterCard have repeatedly and incorrectly claimed that the Durbin amendment would harm community banks and credit unions. In fact, the amendment goes to great lengths to protect the rights of small financial institutions, exempting all but the largest 1% of banks and credit unions from the amendment’s debit fee regulations.
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 merchants across America, and 80 percent of this money went to just ten large banks.
A copy of today’s letter appears below:
May 27, 2010
Joseph Saunders
Chairman and Chief Executive Officer
Visa Inc.
P.O. Box 8999
San Francisco, CA 94128-8999
Robert Selander
Chief Executive Officer
MasterCard Worldwide
2000 Purchase St.
Purchase, NY 10577-2509
Dear Mr. Saunders and Mr. Selander:
I write in regard to the unfortunate coordinated campaign your companies have launched distorting the impact of my recently-passed interchange amendment on small banks and credit unions.
It appears that, in an effort to frighten small banks and credit unions into opposing the amendment, your companies are threatening to make changes to your small bank interchange fee rates and to your network operating rules. These changes, which are not in any way required by the amendment, are unnecessary and would disadvantage small card-issuing institutions.
I ask you each to state unequivocally that you are neither threatening nor planning to take steps that would purposefully disadvantage small institutions, should the amendment become law. Further, I warn you that if your companies coordinate with each other or collude with your largest member banks to make changes to your fees and rules, it would raise serious concerns that you are engaging in an unlawful restraint of trade.
The amendment I offered, which was passed by the Senate in a bipartisan vote of 64-33, would establish a reasonable interchange fee standard for transactions involving debit cards issued by banks with assets of over $10 billion. The amendment would also prevent your companies from punishing merchants who provide discounts to customers for use of a particular card network (e.g., Visa vs. MasterCard) or a particular form of payment (e.g., cash vs. debit card vs. credit card), or who set minimum or maximum dollar thresholds for use of a credit card.
This language was carefully drafted in order to avoid creating any disadvantage for small banks and credit unions, and I went to great lengths to protect the ability of these small institutions to successfully compete with big banks in offering payment cards to consumers.
As you know, the amendment does not in any way require changes to the interchange fee rates that your companies have established for small banks and credit unions. In fact, 99% of all U.S. financial institutions are exempted from the amendment’s debit fee regulations.
Nor does the provision in any way permit merchants to discriminate against cards issued by small issuers. It does not touch your current network operating rules that require that cards be honored in the same way regardless of the identity of the bank that issued the card.
The only way that small banks or credit unions could experience interchange rate reductions or be discriminated against is if your companies decide to cut small bank interchange rates and rescind your operating rules that currently prohibit discrimination between card-issuing banks. Sadly, it appears from your companies’ public statements and other communications that you are contemplating just such steps.
In a May 20 statement, Visa charged that the amendment “could especially harm community banks and credit unions that depend on interchange to offer competitive banking services to firefighters, police officers, teachers, veterans, congressional staffers and other customers.” Also in a May 20 statement, MasterCard said the amendment will "punish banks on Main Street because the ‘carve-out’ for banks with assets below $10 billion is a sham.” The simple fact is, however, that small banks would not be harmed or punished under the amendment unless your companies decide to harm or punish them.
If your companies were to coordinate such punitive actions in the same way that you appear to have coordinated your messaging tactics, serious concerns would be raised that you are engaging in an unlawful restraint of trade. Further, I would caution you not to collude with your largest member banks to change your fees and rules in an effort to protect the big banks against competition from smaller card-issuing banks. Such steps would also raise serious antitrust concerns.
I know that your companies strongly oppose the amendment that was adopted by the Senate, and I am not surprised by your opposition. The provision would correct anti-competitive aspects of a system that has brought enormous revenue to your companies and to the largest banks at the expense of America’s small businesses and consumers. Nevertheless, I urge you to commit that if this amendment becomes law, you will not take steps to purposefully disadvantage small issuers. By making such a commitment, you will provide much-needed reassurance that you are not attempting to protect the biggest banks you serve by threatening the smallest.
Please respond in writing to this letter by June 14. I look forward to receiving your responses.
Sincerely,
Richard J. Durbin
United States Senator
cc: The Credit Union National Association
The Independent Community Bankers of America
The National Association of Federal Credit Unions
The American Bankers Association
The Financial Services Roundtable
The Community Bankers Association of Illinois
The Illinois Bankers Association
The Illinois Credit Union League