WASHINGTON -- Representatives Jason Chaffetz (R-Utah) and Bill Owens (D-N.Y.) are introducing legislation in the U.S. House to repeal the Durbin Amendment, the debit-card interchange fee regulation in the Dodd-Frank Wall Street Reform & Consumer Protection Act, "to restore balance to the electronic payments system," they said.
Merchant groups expressed outrage at the news that the congressmen would be introducing the legislation to repeal the swipe-fee reforms that they said "are just beginning to benefit merchants, consumers and small banks across the country."
The amendment places a cap on per-transaction swipe fees that banks charge retailers when purchases are made via debit cards. The old fee was approximately 44 cents per transaction. As of October 1, the amendment limits this to about 21 cents per transaction.
Chaffetz called the Durbin Amendment "an affront to consumers and the banking industry. These legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue.
"The Durbin Amendment is harmful for community banks, credit unions and the communities they serve," said Owens. "While Congress clearly intended to exempt these smaller institutions from the cap on interchange fees, it's clear the Durbin Amendment will have unintended costly consequences for my constituents and their checking accounts."
Mallory Duncan, chairman of the Merchants Payments Coalition (MPC) and senior vice president and general counsel of the National Retail Federation (NRF), said, "For members of Congress today to do the bidding of the country's biggest banks and attempt to repeal these reforms is an affront to merchants and their customers. Repealing these reforms sends a message that anti-competitive, price-fixing behavior on the part of the country's biggest banks is acceptable."
As a result of the reforms and the small bank exemption, small banks and credit unions are using the exemption and the two-tier interchange system to their advantage. Some are even paying consumers to open checking accounts and use debit cards. According to the National Association of Federal Credit Unions, traffic to its credit union locator site has increased more than 200% in the past week as customers have started looking for small banks that are effectively usng the new two-tier system, MPC said. This is benefiting small banks and their customers.
"Earlier these lawmakers claimed they were trying to protect the interests of small banks and credit unions," said Lyle Beckwith, senior vice president of government relations at the National Association of Convenience Stores (NACS). "Now that numerous stories prove that customers are fleeing high-fee banks in favor of smaller institutions, it is clear that Congressmen Chaffetz and Owens are merely shilling for their too-big-to-fail friends."
The legislation would cost consumers more than $6 billion a year in savings that merchants plan to pass along to their customers, the NRF said. "This misguided legislation would take billions of dollars in savings away from American consumers," added Duncan. "The banks tried to stop this law from being passed, they tried to delay it once it was passed, and they managed to water down the amount merchants and consumers will save. Now that it's just barely taken effect, they are trying to repeal it before anyone can benefit. Congress needs to stop doing the bidding of the banks and think about the people who paid for the bank bailout not so long ago--consumers and Main Street merchants."
On the news that the legislation would be introduced, the Petroleum Marketers Association of America said, "PMAA opposes any effort to weaken the important swipe-fee reforms."
Click here for previous CSP Daily News coverage of the swipe-fee issue.
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