In 2010, a Democratic-controlled Congress established price controls and new routing regulations on debit card transactions with the Durbin Amendment (Section 1075 of the Dodd-Frank Act). In 2017, a Republican-controlled Congress had the chance to repeal the Durbin Amendment, but it failed to do so.
Given that voters expect conservative members of Congress to protect them against government price controls, this failure was rather disturbing. Now it appears that Republicans are going even further: Rumor has it they’re working to help Democrats extend the Durbin Amendment to the credit-card market.
The Innovative Payments Association reports:
Sen. Dick Durbin (D-IL) is working on legislation that would apply similar limitations on credit interchange as the Durbin Amendment has applied to debit interchange. Specifics and timeline are unclear at this point, but indications are coming from the Hill that the legislation could focus on routing and potentially prohibit network exclusivity for credit routing. Sen. Durbin is also thought to be courting Sen. Kevin Cramer (R-ND) as a co-sponsor.
Business owners – not federal bureaucrats – best understand what prices they need to charge to earn a living and to make their investments worthwhile. So, it is troubling that any conservative member of Congress would even entertain the idea of the federal government telling business owners what price they can charge and which suppliers they must use.
When one considers the damage the Durbin Amendment has already caused, and the rapidly changing landscape of the payments industry, this current effort is mindboggling.
For those that need it, here’s a quick refresher.
Back in the 1980s, when consumers started relying on plastic cards instead of checks to make their purchases, retailers started fighting with card network companies and the banks that issue the cards. Then, the problem centered on high credit-card transaction fees.
Years later, as debit cards started growing in popularity, retailers started lodging the same complaints for debit transactions. In both instances, they claimed that the card networks – mainly Visa and MasterCard – and large card-issuing banks were keeping fees artificially high. The only problem was that by the time debit transactions started taking off, the credit-card fee dispute was already bogged down in the courts.
In 2010, the Durbin Amendment required the Federal Reserve Board of Governors to cap the debit card interchange fees that large banks charge. It also required card networks to provide merchants with an option to route through at…
Read More: Extending The Durbin Amendment To The Credit-Card Market Will Harm