Opinion

The Durbin Amendment Will Yet Be Judged for Its Failures

In a disappointing turn of events, Congress has decided to strip out crucial language from the Financial CHOICE Act that would have righted a serious wrong done to consumers over the last seven years.

Last month, the House Financial Services Committee voted to include language in the bill to repeal the disastrous Durbin amendment, and do away with price controls on debit interchange fees that have provided retailers $42 billion in profit since 2011. These same retailers promised to lower prices for their customers with the additional revenue, but those savings never materialized and in many cases prices have been increased. Tacked on to the enormous Dodd-Frank bill in the 11th hour, the Durbin amendment was full of empty promises that were never fulfilled.

After the House Financial Services Committee voted twice in the past year to repeal the provision, congressional leadership caved to pressure from retailers and their lobbyists to scrap the Durbin amendment repeal at the last minute, before the legislation goes to the full House for a vote. The repeal language was a critical piece of this bill, with many advocates, but also many opponents. Big box retailers are very happy with the windfall they have seen, and would like to keep perpetuating the myth that the Durbin amendment is a boon to consumers. They seek to keep the status quo, regardless of its negative consequences.

The Durbin amendment starts as a disservice to consumers it portends to protect, but its ripple effect goes far beyond. Revenue from interchange fees is vital to supporting the network of financial institutions involved in the electronic payments process. But the price controls large retailers champion have put financial pressure on small community banks and credit unions and led to a reduction in basic services at such as free checking and debit rewards programs. This scale-back hurts low-income consumers, who often rely on these small but meaningful perks to make ends meet. These are the same consumers who are still paying the same high prices at the checkout. They are getting hit twice by legislation that was supposed to benefit them.

Small businesses have been negatively affected as well. The Durbin amendment set a floor, as well as a ceiling, for interchange fees, and now some small merchants are paying more than ever for accepting debit cards. Mom-and-pop shops should not be paying anywhere near the same rate as Target or Walmart for offering their customers the convenience of electronic payments.

While I am disappointed by the current state of affairs, I am heartened by the attention that has been brought to this issue. Day by day a growing number of consumers, small businesses and economists are voicing their displeasure at this burdensome provision. Surveys have confirmed that consumers feel they have gotten the raw end of the deal, and as pressure builds I am confident Congress will eventually do the right thing.

The National Black Chamber of Commerce commends those members who are already in that camp, including Representatives Blaine Luetkemeyer (R-Mo.) and Ted Budd (R-N.C.).

However, this change of heart by Congress will not go unnoticed by consumers and their advocates. We will continue to draw attention to the failures of the Durbin amendment and build on the momentum we have seen until we get a final repeal.

 

Harry C Alford is president of the National Black Chamber of Commerce.

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