Image via WikipediaGovernment Price Regulation on Debit Card Acceptance Costs Could Drive Small Financial Institutions Out of the Debit Market
Purchase, N.Y., May 13, 2010 - The amendment to the financial regulation reform bill approved today by the Senate will reduce competition and hurt consumers, MasterCard said. The Company continues to oppose the amendment approved in the U.S. Senate that is designed to increase profits for big box merchants at considerable expense to consumers, community banks, and credit unions.
The amendment, which was offered by Senator Dick Durbin (D-IL), attempts to regulate the operation of debit card networks by shifting costs from big box merchants to consumers. The Durbin amendment would give lobbyists for big retailers what they have been unable to achieve through other efforts – the ability to maintain all the benefits they receive from debit card acceptance while transferring the cost to consumers. The Government Accountability Office, in a recent report on interchange fees, acknowledged that is what happened in Australia when the government there arbitrarily regulated these fees – consumers ended up paying more for their payment cards, and there appears to be no evidence that merchants have passed on any savings to consumers as a result of artificially reduced interchange fees.
The Durbin amendment would also provide merchants greater flexibility to use discounts to encourage consumers to use different forms and brands of payment. MasterCard rules already allow merchants to discount for cash, check, debit and competing brands, but few merchants choose to use this option to reduce costs for consumers. The amendment would also allow merchants to set minimum and maximum transaction amounts for the use of payment cards. For reasons unexplained, Senator Durbin’s amendment would not require big box merchants to disclose these anti-consumer limits to consumers, so consumers would find themselves surprised at the cash register when they find their cards are rejected because they spent too much or not enough. Network rules currently protect consumers from this type of harm and must be left in place.
In short, this amendment helps big merchants, but consumers will pay the price.
The Durbin amendment is opposed by community banks and credit unions as well as small business organizations. For example, the Independent Community Bankers of America and the Credit Union National Association have noted that the amendment would “significantly harm thousands of community banks and credit unions that offer debit and credit cards to their customers and members.” Additionally, small business organizations like the National Black Chamber of Commerce and the Latino Coalition have also expressed their opposition directly to Senators.
We urge Members of Congress to protect consumers, community banks, credit unions, and small businesses by opposing this amendment as the bill moves forward.
The amendment, which was offered by Senator Dick Durbin (D-IL), attempts to regulate the operation of debit card networks by shifting costs from big box merchants to consumers. The Durbin amendment would give lobbyists for big retailers what they have been unable to achieve through other efforts – the ability to maintain all the benefits they receive from debit card acceptance while transferring the cost to consumers. The Government Accountability Office, in a recent report on interchange fees, acknowledged that is what happened in Australia when the government there arbitrarily regulated these fees – consumers ended up paying more for their payment cards, and there appears to be no evidence that merchants have passed on any savings to consumers as a result of artificially reduced interchange fees.
The Durbin amendment would also provide merchants greater flexibility to use discounts to encourage consumers to use different forms and brands of payment. MasterCard rules already allow merchants to discount for cash, check, debit and competing brands, but few merchants choose to use this option to reduce costs for consumers. The amendment would also allow merchants to set minimum and maximum transaction amounts for the use of payment cards. For reasons unexplained, Senator Durbin’s amendment would not require big box merchants to disclose these anti-consumer limits to consumers, so consumers would find themselves surprised at the cash register when they find their cards are rejected because they spent too much or not enough. Network rules currently protect consumers from this type of harm and must be left in place.
In short, this amendment helps big merchants, but consumers will pay the price.
The Durbin amendment is opposed by community banks and credit unions as well as small business organizations. For example, the Independent Community Bankers of America and the Credit Union National Association have noted that the amendment would “significantly harm thousands of community banks and credit unions that offer debit and credit cards to their customers and members.” Additionally, small business organizations like the National Black Chamber of Commerce and the Latino Coalition have also expressed their opposition directly to Senators.
We urge Members of Congress to protect consumers, community banks, credit unions, and small businesses by opposing this amendment as the bill moves forward.
About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 22 billion transactions each year, and provides industry-leading analysis and consulting services to financial-institution customers and merchants. Powered by the MasterCard Worldwide Network and through its family of brands, including MasterCard®, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com. Follow us on Twitter: @mastercardnews.
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 22 billion transactions each year, and provides industry-leading analysis and consulting services to financial-institution customers and merchants. Powered by the MasterCard Worldwide Network and through its family of brands, including MasterCard®, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com. Follow us on Twitter: @mastercardnews.
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