Capitol Hill Fight Over Debit Card Fees Reignites

Credit union advocacy groups NAFCU, CUNA and AACUL all weigh in on divisive issue over interchange charges.

To the credit unions and banks, it’s the merchants, and maybe Sen. Richard Durbin, D-Ill. who are the villains.

To the merchants, credit unions and banks are the bad guys.

The battle over the need and impact of the so-called “Durbin Amendment” flared anew on Capitol Hill Wednesday, as the Senate Judiciary Committee, now chaired by Durbin, held a hearing on the issue.

What is the Durbin Amendment?

The Durbin Amendment, part of Dodd-Frank, established a cap on debit interchange fees for credit unions and banks with assets of more than $10 billion, and instituted new routing network requirements for debit cards.

Merchants, consumer groups and financial institutions have been fighting over the amendment ever since it was enacted in 2010.

“As a consumer advocacy group, we have long supported credit and debit interchange—or swipe—fee reform and the Durbin amendment, which made debit interchange markets fairer,” Ed Mierzwinski, senior director of federal consumer programs at U.S. PIRG, told the committee.

He added his group favors expanding the Durbin amendment to cover credit cards, as well as debit cards.

“Unfortunately, credit card interchange fees continue to accelerate, because there is nothing to restrain Visa and Mastercard from charging merchants, and their customers, even more,” he said.

Doug Kantor, general counsel for the National Association of Convenience Stores, offered a different perspective.

“The bottom line is that abuse of consumers by banks will continue as long as they have the incentive to treat people that way,” he stated. “Interchange fees are the key incentive with which Congress has not yet dealt.”

The Response from Credit Union Advocacy Groups

No credit union official testified at Wednesday’s hearing, but trade groups sent letters to the Senate committee.

“The largest retailers are asking you, once again, to expand interchange regulations to limit their costs and add to the growth they have achieved amidst the pandemic while so many small businesses were forced to close,” the Credit Union National Association (CUNA), the American Association of Credit Union Leagues (AACUL) and state credit union leagues wrote in a joint letter.

The groups claimed interchange fees keep consumers, merchants, and financial institutions safe as they cover the cost of fraud detection, credit monitoring and other services. Expansion of the Durbin Amendment to the credit card market, they added, would increase the cost of credit to consumers.

Dan Berger, president/CEO of the National Association of Federally-Insured Credit Unions (NAFCU), made similar arguments and maintained merchants receive far more value from accepting electronic payments than they pay in interchange fees.

“While envisioned to help consumers, the ‘Durbin amendment’ has instead lined the pockets of big-box retailers, with little evidence of price cuts for consumers or benefits to small merchants,” Berger said.