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The Durbin Disaster

By: Kari English

On May 13, the Senate voted on an amendment proposed by Senate Majority Whip Richard Durbin, D-Ill., to allow the Federal Reserve to cap interchange fees charged by banks and credit card companies. In addition, the measure would allow merchants to offer discounts for cash, checks or competing card brands, and set minimum or maximum purchase limits for consumers who want to buy with credit cards. It was accepted by a vote of 64–33.

The amendment has caused a lot of controversy (as if the reform bill wasn’t controversial enough already). Big banks and credit card issuers are upset, naturally, because they will lose a large stream of revenue from interchange fees. Community banks and credit unions are unhappy with the amendment because, while it excludes institutions under $10 billion in assets from the fee cap, they believe merchants will favor cards from big banks because they will presumably have lower interchange fees.

Accusations have flown between various affected entities and Durbin recently. MasterCard has said the amendment will definitely hurt consumers and community banks if it passes. In turn, Durbin has accused MasterCard (and Visa) of making threats and scaring community banks and credit unions into opposing his amendment. Then he chastised the community banking industry for being coerced into opposing his amendment.

Meanwhile, much to the disappointment of all bankers, the amendment made it through the conference committee with few changes and the entire legislation has more or less been finalized. Following this turn of events the Independent Community Bankers of America released a statement saying, “ICBA is gravely disappointed that debit interchange language was included in the bill. This ‘compromise’ proposal will only compound the harm to consumers and Main Street by imposing new and onerous burdens on debit card issuers, and will fail in any way to adequately account for the significant operational costs and losses incurred by community banks due to fraud and merchant data breaches.”

Similarly, the American Bankers Association released a statement saying it remains “strongly opposed to the legislation agreed to by the House and Senate conferees. The legislation in question simply does more harm than good and will make it exceedingly difficult for banks to be the drivers of economic growth and recovery going forward.”

For more about the Durbin amendment and how it will affect community banks, go to this special report at

Community Banks/Credit Unions



Big Banks/Credit Card Companies

Kari English is senior editor of BankNews.

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