Deep-Sixing Durbin


With a powerful coalition, ICBA still fights to end interchange price controls

By Tim Cook

Six years ago, against vocal objections from ICBA and other financial groups, Congress hastily enacted the Durbin Amendment that imposed government price controls on debit interchange fees for the nation’s largest banks. As community bankers well remember, the legislation, aggressively advocated by the largest retailers, was tacked on at the last minute to the massive financial reform package lawmakers enacted in response to the Wall Street financial crisis.

At the time, ICBA and community bankers widely explained that the market intervention of the Durbin interchange price controls would never benefit consumers and would eventually, inevitably come to harm community banks and credit unions, despite the law’s special exemption for financial institutions of $10 billion in assets or less. As ICBA pointed out, community banks weren’t immune to the free-market responses to the law in the highly competitive payments marketplace that the government couldn’t restrain.

Fast forward six years, and ICBA’s warnings have been on target. Evidence is mounting that Durbin has resulted in less interchange revenues of community banks and credit unions. Not only hasn’t the $36 billion revenue windfall that Durbin provided the merchant industry benefited consumers, many community banks are now seeing their net debit interchange revenues decline as the overall card payments marketplace responds and adjusts to Durbin’s big-bank price controls.

“Community banks are beginning to report to us that they are seeing a precipitous decrease in net debit revenue due to the routing and exclusivity provisions,” says Aaron Stetter, ICBA’s executive vice president of congressional relations and advocacy. “The big-box merchants are steering point-of-sale transactions toward PIN debit transactions that generate less interchange revenue for community banks.”

Working with a coalition
As the sole community banking industry representative of the Electronic Payments Coalition (EPC), ICBA has continued efforts to persuade members of Congress to repeal the Durbin Amendment as a failed policy venture. The EPC is a powerful alliance between ICBA and several of the largest card-issuing banks and their trade associations. Actively involved with the EPC for close to a decade, ICBA has been a vitally important participant in interjecting the voice and views of community banks into various payments issues.

With Stetter serving as its chairman for the past year, the coalition’s most prominent advocacy efforts in Washington have been to repeal the Durbin Amendment. As he explains: “The merchant community sold Congress a false bill of goods. Merchants said they would pass the interchange savings onto consumers—and that didn’t happen. ICBA also predicted that the exemption from Durbin’s price controls for community banks and credit unions with $10 billion in assets or less wouldn’t work—and it hasn’t.”

ICBA has been busy with the EPC, educating lawmakers and countering the merchant industry’s aggressive, misleading lobbying campaigns to hold onto the Durbin Amendment, Stetter says. Alongside the EPC, ICBA has worked to advance the statutory repeal of Durbin as included in the Financial CHOICE Act, a financial services reform legislative package that cleared the House Financial Services Committee in September.

Another ongoing task of ICBA and the EPC has been to counter persistent but misleading and heavily financed media campaigns by retail merchant trade groups. The organizations have developed and delivered various communications about the Durbin Amendment’s failure to pivotal lawmakers and their constituents. The EPC also has ramped up its education efforts with sponsored posts on social media and other outlets with quick, digestible explanations of the amendment’s impact and encouraging customers to contact representatives.

Countering merchants
ICBA also has joined many of the coalition’s visits to lawmakers’ offices on this issue. For example, the coalition directly lobbied every member of the committee, organized a summer-long grassroots outreach effort during recess, and placed op-eds and ads in Capitol Hill publications.

“We met with every member of the committee to show them that Durbin has been a failure because, first, they haven’t passed along savings to the consumer as promised, and, second, community banks, which were supposed to be held harmless by Durbin, are losing
revenue,” Stetter says.

“The merchant community sold Congress a false bill
of goods.”
—Aaron Stetter, ICBA’s executive vice president of congressional relations and advocacy

Molly Wilkinson, executive director of EPC, points out that in June the coalition launched the website to educate consumers about how the Durbin Amendment has not worked for customers or small businesses. Useful in educating lawmakers and their staffs, the coalition’s website has a messaging feature that allows a person to send a pre-written letter or to write their own calling for repeal. (An individual just enters his name and ZIP code into the website and presses send for a letter to automatically reach his representative in Congress.)

Meaningful policy change takes a long time in Washington, and Stetter describes the EPC as “an effective cop on the beat.” With ICBA, however, the EPC’s advocacy on repealing the Durbin Amendment has included the voice of community banks, a critical constituency necessary for the joint advocacy effort to achieve success, Stetter says. “We have a great amount of influence within the EPC,” he adds. “Because we represent community banks, that’s something to hang your hat on.”

Looking ahead, ICBA is committed to working with the EPC to continue to educate Congress and the public of the harmful effects of the Durbin Amendment, Stetter says. As an entirely new Congress convenes next year, he says, the association will continue to press for the repeal of the government price controls of free-market interchange rates, showing the harm those controls are imposing that previous lawmakers had never foreseen.

Tim Cook( is ICBA’s senior vice president–publications. Kathryn Jackson Fallon, a writer in New York, contributed to this article.