On May 10, Senator Dick Durbin (D-IL) introduced an amendment to S. 3217 (which would ultimately become the Dodd-Frank Act), an amendment written by giant retailers, for giant retailers, that wanted Congress to help them improve profits by setting price controls on debit card acceptance fees.
Only three days later – with no hearings, studies, or in-depth analysis of the impact of the amendment on consumers, small businesses, community banks or credit unions – the Senate voted in favor of the amendment. In an effort to secure needed votes from skeptical Senators, Senator Durbin hand-wrote edits in the margins that sought to “carve out” exemptions for smaller financial institutions. Immediately following the vote, community banks and credit unions objected, saying the carve out would not work.
Despite objections by a bipartisan group of 131 House members expressing “grave concerns” about the Durbin amendment. President Obama signed Dodd-Frank into law in July 2010. The original House version of Dodd-Frank included no such price cap on interchange fees, so the House did not have the opportunity to review, debate, or vote on the Durbin amendment. After a conference committee to resolve differences between the House and Senate versions, the Durbin amendment remained, along with a new provision relating to the routing of transactions – a provision not considered by either the full House or full Senate.
The Durbin amendment’s price controls went into effect on October 1, 2011. To date, there is no evidence that retailers are passing along savings to their customers.
Added in the Dark of Night
- Debit interchange had nothing to do with the financial crisis, and this provision had no place in the Dodd-Frank Act.
- There was no consideration in any Congressional committee.
- There was no vote in the House of Representatives.
- There was only scant discussion in the Senate — and that was by the lone sponsor of the amendment.
- There was no analysis presented to Congress of the impact on consumers, the banking system, or the overall economy.
- There was no analysis of whether the $10 billion asset “carve out” would be effective in avoiding harm to community banks and credit unions.