When will it end?
As the battle between big banks and big retailers over interchange fees drags on, consumers, credit unions and mom-and-pop retailers are the victims as Congress injected itself into the fight.
When retailers lobbied Congress to impose price controls on interchange fees–promising to pass any resulting savings along to their customers in the form of lower prices–the result was the Durbin amendment, which was poorly designed and shoehorned into the federal Dodd-Frank Act.
Now, two years after the government’s intervention, consumers are not seeing the promised benefits: lower prices or discounts for paying with debit. In fact, it is anticipated that some retailers may start charging checkout fees for those paying with credit thanks to a $7.25 billion settlement between the payments and retail industries. This is in addition to the $8 billion large retailers received from lobbying Congress. This settlement will no doubt impact small financial institutions. CUNA estimates this could cost credit unions as much as $50 million.
Credit unions were supposed to have been exempted from the fallout of Durbin price controls. However, they are beginning to see their interchange revenue drop as well. A recent report by the Federal Reserve shows the first signs of harm to even our smallest community institutions. The Federal Reserve Board’s data also show that the average interchange fee received by exempt issuers (credit unions and small banks) declined by two cents or around 5% after the rule took effect, declining from 45 cents over the first three quarters of 2011 to 43 cents in the fourth quarter of 2011.
Small retailers, the very entities Durbin claimed to help, are now feeling the pain and paying more. Before government intervention, all retailers paid less than 1% per debit transaction. But today, these small retailers are paying the much higher price-controlled amount, a flat 23 to 25 cents, compared with what used to be a few pennies, while mega-retailers pay a much lower price-controlled amount.
The credit union movement has made enough concessions. We need to band together and send legislators and regulators need a clear message that we have had enough. Join me in contacting Congress to let them know Durbin didn’t work, and tell big retailers and your representatives that it’s time to press pause on the fight at wheresmydebitdiscount.com/email-congress. Better yet, sign the petition demanding the debit discount you and your members were promised from the Durbin amendment at wheresmydebitdiscount.com/take-action/. Your voice does make a difference.
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