Durbin Urges The Office Of The Comptroller Of The Currency To Clarify Its Misinterpretation Of Interchange Fees
SPRINGFIELD –U.S. Senate Majority Whip Dick Durbin (D-IL), author of the “Durbin Amendment,” sent a letter to the Office of the Comptroller of the Currency (OCC) requesting it to clarify its understanding of interchange fees in light of the OCC’s recent amicus brief filed in Illinois Bankers Association v Raoul. In the letter, Durbin highlights the fact the OCC may be misinterpreting or misstating basic elements of interchange fees, which is particularly troubling given the OCC’s statutory role to enforce national banks’ compliance with debit interchange fee regulation under the Durbin Amendment.
The U.S. interchange fee system is dominated by the Visa-Mastercard duopoly, which price-fixes fee rates on behalf of thousands of financial institutions, stifles competitors, and imposes excessively high fees that ultimately inflate consumer prices. In 2010, Congress passed the Durbin Amendment, which reined in debit interchange fees and promoted network competition in the debit card industry. Now, states are passing sensible reforms to address market failures and high interchange fees. In June 2024, the Illinois State Legislature passed and Illinois Governor JB Pritzker signed into law the Interchange Fee Prohibition Act (IFPA), which prohibits charging interchange fees on the tax and tip portions of a transaction. The IFPA aims to reduce the excessively high interchange fees that merchants pay and ultimately are passed to consumers.
Durbin wrote, “The OCC either misunderstands or misstates how interchange fees work in its amicus brief in support of several banking associations’ lawsuit opposing the IFPA. First, the OCC has claimed that the IFPA represents a state incursion into ‘national banks’ authority to set fees for services rendered.’ This is incorrect. As the OCC should know, banks do not set interchange fees. Instead, card networks establish interchange fees, and the fees then are received by card-issuing banks on credit and debit card transactions. Centralized fee-fixing by card networks like Visa and Mastercard is structurally anti-competitive, as banks do not compete with one another over the fees they receive, and the OCC should be troubled by this collusive arrangement. At a minimum, the OCC should clarify its inaccurate representation that interchange fees are set by banks.”
The letter continues to highlight various examples of the OCC’s misunderstandings of interchange fees.
Durbin continued, “The OCC’s apparent misunderstandings or misstatements about interchange fees are particularly troubling because it enforces compliance of the debit interchange fee regulation under the Durbin Amendment for OCC-regulated national banks. Although other enforcement agencies, including the Federal Reserve, Department of Justice, and Federal Trade Commission, have acted when banks and networks have sought to circumvent the Durbin Amendment’s provisions, to my knowledge, the OCC has never taken any such enforcement action. The OCC’s recent statements raise concerns that confusion about interchange fees may be the cause of the OCC’s passivity when it comes to enforcing the Durbin Amendment, and perhaps such confusion also is animating the OCC’s criticism of state efforts to pass reforms that are complementary of, and consistent with, congressional action to address interchange market failures.”
The letter concluded, “I urge the OCC to clarify the above-mentioned claims and ensure that it is fully informed about interchange fees before publicly commenting on such fees in the future.”
In Congress, Durbin has made it a priority to protect consumers. In 2010, Congress passed his Durbin Amendment which capped debit interchange fees at a “reasonable and proportional” amount.
Building off of debit card competition reforms enacted by Congress in 2010, Durbin’s Credit Card Competition Act is bipartisan legislation that would enhance competition and choice in the credit card network market, which is currently dominated by the Visa-Mastercard duopoly. 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 alone. 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.
Full text of the letter can be found here.
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