Debit Card Issuer Survey Also Finds Decline in Revenue for Small Financial Institutions
Washington, DC – Today, the Board of Governors of the Federal Reserve System announced that it is not proposing any revisions to the debit interchange fee cap provided by Regulation II (the “Durbin amendment” regulation), following the publication of its report on interchange fee revenue and debit issuer costs – the second in a series to be published every two years, pursuant to Section 920 of the Electronic Fund Transfer Act (EFTA).
In this report, the Board also finds that interchange revenue has begun to decline for smaller credit unions and community banks that were supposed to have been “exempt” from these price controls. In the report, the Board writes, “In contrast, the average interchange fee per transaction received by exempt issuers declined 4 percent, from 45 cent to 43 cent after the interchange fee standard became effective October 1, 2011.”
“The Durbin amendment was bad policy from day one,” said Trish Wexler, spokeswoman for the Electronic Payments Coalition. “It’s been more than a year, and consumers are still not seeing any of the savings they were promised. The Durbin amendment has harmed consumers by forcing card issuers to eliminate free checking and other consumer benefits to make up for an $8 billion revenue loss. With today’s announcement, at least the Durbin amendment wasn’t made any worse than it already is.”
This report adds to other recent surveys demonstrating that the exemption for small financial institutions is beginning to break down. A recent Credit Union National Association member survey showed that credit unions saw interchange revenue drop collectively by over $1 million in the third quarter of 2012.
“When Congress intervened in this market, it set off a round of distortions that are currently working their way through the system,” said Wexler. “Credit unions and community banks expect the erosion in interchange income to continue, and we believe that it will become even more apparent by the latter part of this year.”
About the Electronic Payments Coalition
The Electronic Payments Coalition (EPC) includes credit unions, banks, and payment card networks that move electronic payments quickly and securely between millions of merchants and millions of consumers across the globe. EPC’s goal is to protect the value, innovation, convenience and competition in today’s growing electronic payments system. EPC educates policymakers, consumers and the media on the system’s role in economic growth, and the importance of protecting consumer choice and stability for the continued growth of global commerce.