The American Bankers Association suffered a defeat in its fight against swipe-fee reform and is wrong to tell Congress it made a “mistake” in enacting the reform, Sen. Dick Durbin (D-Ill.) said.
Durbin, assistant majority leader of the Senate, sent a Sept. 25 letter to Frank Keating, president and CEO of the American Bankers Association (ABA), “to set the record straight about swipe fee reform,” Durbin’s office said in a statement. The letter was in response to one the ABA sent to congressional leaders a week earlier calling swipe fee reform a “mistake.”
“Last week you sent a letter to the United States Congress in which you criticize the debit interchange reform law that Congress enacted as a ‘mistake,’” Durbin wrote. “While the banking industry may resent that its enormous lobbying effort did not produce a different outcome, a defeat is not the same as a mistake.
“Main Street businesses all across America that were previously being crushed by ever-rising debit swipe fees are now seeing real relief,” Durbin’s letter continued. “This relief has been achieved without any significant negative impact on the small banks and credit unions that were exempted from interchange regulation –in fact, these small financial institutions have been thriving since reform took effect. Many consumers have been able to receive discounts for buying products such as gasoline and airline tickets with their debit cards, and many more have benefitted as merchants have been able to keep prices down as a result of lower interchange costs. Far from being a mistake, debit interchange reform is showing real results.”
Keating, in his Sept. 20 letter to leaders of the House and Senate, wrote:
“Once again, the retail industry is bombarding Congress with manufactured claims of unfairness over how the U.S. payments system operates, part of an effort to drag lawmakers back into the controversial debate over interchange fees and how market participants share in financially supporting that system. The American Bankers Association (ABA) represents banks of all sizes and charters, and strongly disagrees with the merchant community’s assertions.
“We believe that a recent negotiated settlement between the industries involved represents a historic opportunity for policymakers to put the debate over further government price controls behind them. While the settlement comes at a significant cost to financial institutions, it ultimately works to the benefit of consumers and the payments system as a whole. Here are the facts.
“After more than seven years of negotiations that culminated in July, the card industry and retailers worked out an unprecedented legal settlement in a long-running antitrust lawsuit, providing an estimated seven million merchants with more than $7.2 billion in payments. The settlement also includes several significant structural reforms that will enable all merchants to negotiate better terms over the level of interchange that applies to credit card transactions. In sum, the settlement – voluntarily entered into by retailers, financial institutions, and card networks – represents a market solution that resolves the outstanding disputes raised by the parties involved.
“Yet despite this resolution, some in the retail community, most recently the Retail Industry Leaders Association (RILA), complain that the settlement is not enough for them, imploring Congress to intervene and impose further price controls. In truth, nothing is ever enough for some in the retail community and their desire to enjoy the benefits of our nation’s truly efficient payments system without ever having to pay for it. It is time for the Congress to say enough is enough.
“The consequences of the so-called Durbin Amendment to the Dodd Frank Act (imposing price controls on debit card transactions) are instructive. More than two years after its enactment, the net effect of that Amendment has been an increase in profits at big-box retailers, higher costs to small merchants, significant reductions in the revenue available to banks to serve local communities, and no sign of the lower retail prices consumers were promised.
“We do not believe it is in the interest of policymakers or the consumers they represent to repeat the mistakes of the past by expanding price controls to more aspects of our economy. Policymakers from both ends of the political spectrum have expressed their support for the settlement as the appropriate means to resolve this dispute. We strongly agree. Moreover, many in Congress have asked the industries to sit down and resolve this matter on our own. We have.
“For the sake of consumers and the broader economy, we respectfully urge you to put this issue to rest once and for all by rejecting calls by some retail groups for even more government price controls that harm consumers.”
Editor’s note: Emphases are the letter writer’s.