Hundreds of state banking associations and banks sent a letter to House leadership explaining the importance of repealing the Durbin amendment. Read the full letter here.
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Campaign for Liberty has joined an “open letter” to Chairman of the House Financial Services Committee Jeb Hensarling requesting repeal of the “Durbin Amendment.” This amendment, named after its sponsor Illinois Senator Dick Durbin, and part of the Dodd-Frank bill, limits “interchange fees,” which are the fees banks and credit unions charge businesses for processing credit card transactions.
Sounds boring? It’s ok you can admit it. I hear you yawing. Or are you asking yourself: “Who cares about a fight between big retailers and big banks?” Well you should care since the costs of these price controls are born by consumers who are faced with fewer services and/or higher fees from their financial institutions.
Over a century ago, politician Simon Cameron famously quipped, “An honest politician is one who, when he is bought, will stay bought.” He could have been referring to congressional efforts to impose price controls on credit card transaction fees.
Senator Dick Durbin (D-IL) is the author of the infamous amendment bearing his name to the Dodd-Frank financial reform bill. The stated purpose of the amendment to assist Fortune 500 retailers who complained about the costs of processing debit and credit cards. From the Senate floor, no less, Durbin recalled how the CEO of Walgreens convinced him to offer the amendment.
Retail lobbying groups will descend on Capitol Hill this morning. They’ll have a few things on their agenda, including arguing that Congress should keep the 2010 Durbin Amendment, which set price controls on debit interchange fees and imposed new regulations on the handling of debit transactions. We know what these groups, which primarily represent big-box merchants and franchisor corporations, will argue. They’ll say that the Durbin Amendment preserves a free market and that consumers will suffer without it.
As I’ve written in these pages before: Lawmakers shouldn’t believe these “alternative facts.” Here’s what’s really happening.
After the repeal and replacement of Obamacare, the next big task facing Congress will be reform of the equally awful Dodd-Frank Act. House Financial Services Committee chairman Jeb Hensarling announced the vehicle for that task last year – the Financial CHOICE Act. Since it was announced, it has included repeal of the Durbin Amendment to Dodd-Frank, but there is now heavy lobbying to drop that provision. The special interests behind the lobbying are wrong. Repeal of the Durbin Amendment is vital for consumers.
A new Congress has been sworn in and a new president inaugurated. As with any changing of the guard in Washington, D.C., there will be significant policy shifts, many of which are happening very quickly. One clear priority of this new administration is rolling back unnecessary government regulations that do nothing to help consumers and have not worked as intended.
As Congress looks for ways to strengthen our nation’s economy and streamline regulation, the No. 1 priority should be to repeal the Durbin Amendment to the Consumer Financial Protection Act of 2010.
WASHINGTON (February 27, 2017) – By a two-to-one margin, voters across party lines agree the Durbin amendment should be repealed, according to new survey data released by Morning Consult.
The Durbin amendment—a provision of the Dodd-Frank Act—put price controls on debit interchange fees, mandated burdensome routing provisions, and ultimately created the merchant markup. Six years after the policy was implemented, American voters of all political stripes say interchange should be left to businesses, not the government.
The survey showed that 58 percent of Independents, 52 percent of Republicans, and 44 percent of Democrats say the government should not be involved with setting interchange rates. The majority of all voters also think that the Durbin amendment is a price control: 60 percent of Republicans, 55 percent of Independents, and 53 percent of Democrats agree.
The Durbin amendment price controls created a windfall, or merchant markup, for big box retailers of $6-$8 billion annually. Retailers promised to pass on the savings—now totaling $42 billion—to consumers by lowering prices. However, two-in-three voters feel they have not received a discount at the register since the merchant markup was implemented in 2011. This is in line with data from the Richmond Federal Reserve, which found just one percent of retailers have lowered prices since then.
“Big box retailers have clearly broken their promises to consumers when it comes to the Durbin amendment,” said Molly Wilkinson, executive director of the Electronic Payments Coalition (EPC). “It is a failed policy of government mandated price controls that hurts consumers first and foremost, but also small businesses, community banks and credit unions.”
EPC supports legislation that repeals the Durbin amendment and encourages Congress to act swiftly on behalf of consumers and the financial institutions that serve them.
To view EPC’s infographic on the polling, click here.
Morning Consult, on behalf of the Electronics Payment Coalition, conducted an online survey of 1,992 registered voters from February 02-04, 2017. Results from the full survey have a margin of error of +/- 2%.
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The Electronic Payments Coalition (EPC) is a coalition of payments industry stakeholders, such as credit unions, community banks, trade associations, payment card networks and banks that speaks on behalf of the payments industry to protect the value, innovation, convenience, security and competition that exists in the modern electronic payments system. The EPC educates policymakers, consumers and the media on the system’s role in economic growth and the importance of consumer choice, security, innovation and stability for the continued growth of global commerce.
To borrow from Henry Adams, politics, whatever its professions, is generally the systematic organization of the politically powerful to plunder the politically weak or disorganized.
The eponymous “Durbin Amendment” (named after U.S. Democratic Senator Dick Durbin) to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act is emblematic.
The amendment contains a debit card network routing provision that profits merchants at the expense of community banks, credit unions, other financial institutions, and consumers. Before the amendment, card issuers could negotiate exclusive contracts with networks. They differentiated themselves with regard to security, reliability, and card acceptance rates. Consumers shopped among the various cards based on these features of their associated networks.
US banks are stepping up efforts to win one of Washington’s fiercest lobbying battles with a push to end limits on debit card fees that they claim have failed to help consumers and handed retailers a $42bn windfall.
The American Bankers Association is hoping to capitalise on Donald Trump’s vow to “do a number” on the Dodd-Frank act as it fights limits on swipe card charges included in post-crisis reforms.
Continue Reading at Financial Times
The other two words that are most terrifying are Dick Durbin…at least to consumers, small businesses and small financial institutions.
The Fix Was Control
Passed as part of the Dodd-Frank financial reform legislation in 2010, an amendment inserted into the bill by Illinois Sen. Dick Durbin required the Federal Reserve to set prices on fees charged to retailers for debit card processing—establishing price caps on debit interchange fees. The move was the culmination of a lobbying campaign championed by Fortune 500 companies like WalMart. They claimed that a reduction in these fees would be passed along to consumer in the form of lower prices. That, of course, never happened.. A study from the George Mason University law school determined that retail prices didn’t drop after the law passed.