Sen. Dick Durbin, D-Ill., is not pleased with the new regulation on debit card fees that bears his name, or with the banks that he accuses of watering it down.
Durbin took the bank lobby to task for blunting the effects of the so called “Durbin amendment,” a new rule capping the “swipe fees” card issuers can charge on transactions, in an op-ed published in American Banker Wednesday. Durbin authored the rule as part of the 2010 Dodd-Frank financial reform law.
The Federal Reserve implemented the rule in 2011, effectively halving fees at the time. But Durbin’s article Wednesday suggested it did not set the cap low enough.
“The Fed’s final rule failed to adequately follow the law I wrote and did too little to rein in the lucrative swipe fee price-fixing scheme created by Visa, MasterCard, and debit card-issuing banks,” Durbin wrote. “Under the Fed’s rule, Visa and MasterCard have gleefully raised swipe fee rates on many types of debit transactions, boosting the profits of their big bank allies but hurting Main Street businesses and their customers.”
Durbin placed the blame squarely on the American Bankers Association, a trade association that fought an initial rule proposed by the Fed that set the swipe fee limit significantly lower. The banks were opposed in that effort by merchants and retailers, who have seen their transactions costs rise in recent years.
“It’s time for the Fed to stop giving deference to the banking industry and correct the industry’s swipe fee increases on small-ticket transactions,” Durbin argued.
Durbin’s article was written in response to an earlier commentary from the former head of the American Bankers Association, who had argued that the rule had not benefited retailers as promised.
A recent survey conducted by the Federal Reserve Bank of Richmond found that fewer than one of every 10 retailers saw their debit card costs fall after the rule was implemented. The study also found that consumers have not benefited from the rule.
