Because of its egregiously negative impacts on American consumers, the “Durbin Amendment” is one of the biggest legislative failures in recent memory. Part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Durbin Amendment’s caps on debit card interchange have continued to not only hurt community financial institutions like credit unions, but more importantly hurt American consumers – the very constituency supporters of the legislation vowed to “protect” – for the last twelve years.
A new February 2022 GAO report found that the Durbin Amendment was “among the top five laws and regulations most cited as having significantly affected the cost and availability of basic banking services.” So when Senator Durbin resurfaced conversations around the expansion of the Amendment at a Senate Judiciary Committee hearing earlier in May, NAFCU didn’t hesitate to point out the flaws of the Senator’s namesake legislation and reiterate the need for repeal, not expansion.
NAFCU strongly opposes any expansion of price controls and market manipulation related to credit or debit interchange. Government interference with debit interchange only benefits the bottom line of mega-merchants, ties the hands of credit unions, and unfairly stifles Americans’ access to the financial services they need. While supporters of the legislation promised the intent was to prevent card-issuers and networks from unfairly charging merchants higher rates and thus passing higher costs along to consumers, evidence proves otherwise. According to Federal Reserve data, this Amendment has taken away $6-8 billion per year from the revenue that banks and credit unions use to serve their customers and members.
If that’s not enough to prove that the Amendment should be repealed, not expanded, it might be easier for lawmakers to understand the issue by hearing directly from those who are impacted, specifically from NAFCU’s members.
Quest Federal Credit Union in Ohio shared that the Amendment has “greatly impacted our ability to continue to provide low-cost financial services for our members. The loss of revenue generated by lower interchange income causes our credit union to increase costs to members and hurts the elderly and members of lesser means who can least afford higher cost of services.”
Amplify Credit Union in Texas has a similar view, sharing “we have only been able to eliminate all banking fees because we have access to value-driven sources of income like interchange. Our elimination of fees is a $2 million giveback to our members and has a far more direct consumer benefit than capping fees for merchants and hoping those savings will be passed along to consumers (with history telling us they are not).”
I’m confident credit unions across the country would echo similar sentiments– and many in low-income and underserved communities – those who understand their mission is to serve Main Street small businesses and families first and foremost.
So rather than interfering with the efficient way credit cards work today, it’s time to hold big-box retailers and e-commerce giants accountable for their failure to pass savings along to consumers that were promised under the failed Durbin Amendment. With more than 70 percent of U.S. GDP dependent on consumer spending, credit unions understand that now more than ever we need to put Main Street businesses and families first and reject the merchants’ call for new laws that would make basic banking services even more expensive for working-class Americans.