New Letter: State Bankers Associations and Credit Unions Nationwide Join ABA and CUNA in United Opposition to Marshall-Durbin Credit Card Interchange Legislation

In a new letter sent to the entire House and Senate, a coalition made up of 51 state bankers associations and state credit union associations and leagues from across the country joined the American Bankers Association and Credit Union National Association in strongly urging lawmakers to oppose Senator Roger Marshall and Dick Durbin’s deeply flawed “Credit Card Competition Act of 2022.” In the letter, the associations say that the misguided Marshall-Durbin proposal will lead to “fewer options for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions and the disappearance of card rewards programs that families of all income levels use to stretch their budgets,' while also 'transferring wealth...to a handful of high-volume, highly profitable large merchants.'

Far from increasing competition in the credit card marketplace, the associations noted that the Marshall-Durbin legislation “will reduce the number of credit card issuers competing for consumers’ business, wring out the competitive differences among card products, decimate card rewards programs (such as airline miles) valued by American families and the tourism sector, and put the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board.” 

The groups also expressed concern that the Marshall-Durbin legislation would hand control of our nation's credit card system to breach-prone merchants.

'The Marshall-Durbin bill purports to provide merchants a choice of which networks credit card transactions are processed across,' the groups wrote. 'But this dual-routing technology does not exist today and for good reason. A credit card transaction is an extension of the bank or credit union’s own funds to its cardholder, who directs those newly lent funds to a merchant. It makes perfect sense that the bank and credit union that lends these funds should carefully and deliberately select the network over which their own funds flow to the merchant. Unlike merchants that specialize in selling groceries or shoes, financial institutions are payments experts responsible for and best positioned to protect their customers against fraud, loss of private data, and the inefficiencies of unreliable systems. Financial institutions are also examined for compliance with privacy, data security, and fair lending laws, while merchants are not.' 

Like the flawed Durbin Amendment that came before it, this new legislative proposal would hurt community banks, credit unions and their customers, according to the associations.

'This experiment has been tried before, with the Durbin Amendment on debit cards, leading to a precipitous drop in the availability of low-cost banking services and free checking accounts for consumers. A recent 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,” the associations said. 

'Further, the merchant lobby’s promise that this regulation would result in savings for consumers never happened – the merchants pocketed the savings.' According to the Federal Reserve Bank of Richmond, after the Durbin Amendment was implemented, 98.8% of merchants failed to pass-through savings realized from debit regulation to consumers, and over 20% increased prices. While supposedly 'exempt' from the Durbin Amendment, community banks and credit unions still suffered a 30% decrease in their interchange revenue. Though the restrictions for 'exempt' issuers are not explicit price controls, they have the same practical effect of distorting the market and transferring wealth from community financial institutions and consumers to a handful of high-volume, highly profitable large merchants.'

The full letter is available here.