Sen. Richard Durbin (D-Ill.) has argued that reaction to his amendment capping debit card interchange represents an opportunity for credit unions and community banks.
In a letter Tuesday to the Illinois Credit Union League, Illinois Bankers Association and Community Bankers Association of Illinois, Durbin argued that the increase in fees from larger banks gives them a strong competitive advantage.
“Now is the moment for smaller banks and credit unions to make crystal clear to these consumers the superior benefits and customer service that your institutions provide compared to the Wall Street giants. I strongly urge your institutions to seize this competitive opportunity, as this will serve both consumers' best interests and your own,” he wrote.
Durbin also noted that both Visa and MasterCard have issued interchange schedules which, he said, should eliminate the fear that the cap will hurt the income of smaller financial institutions.
He also referenced a letter from 10 retail associations, including the National Retail Federation, which declared that retailers would not discriminate against cards from credit unions or community banks because of their higher interchange.
“Currently, merchants are subject to Visa and MasterCard network rules that require us to accept all Visa and/or MasterCard debit, regardless of which bank or credit union issues the card,” the merchants wrote to Durbin in the May 2 letter. “This is called the Honor All Cards rule and we risk the threat of $5,000 per day fines – or higher – if we break this rule, so we assure you that merchants have no intention of violating this term of brand acceptance.”
Those rules also prevent merchants from pricing goods differently based upon the financial institution that issued the card.