Merchant trade groups have kept up a steady drumbeat this year in support of the Dodd-Frank Act’s Durbin Amendment with its debit card regulations. But, with Republicans taking full control of the federal government in January, the drumbeat got louder Tuesday when 627 large and small merchants sent a letter to Congressional leaders urging them to retain the controversial amendment.
Ostensibly, Monday’s letter is yet another appeal by retailers in opposition to a section of the proposed Financial Choice Act, H.R. 5983, that would kill the amendment.
“Language included in Section 335 of [H.R. 5983] would dismantle the substantial progress debit reforms have made in correcting in part an otherwise non-functioning, and non-transparent card acceptance marketplace in the United States,” the letter says. “We strongly urge you not to take up any divisive legislation that repeals debit reforms. Existing debit card fee reforms matter a great deal to our individual businesses.”
Signatories of the letter to House Speaker Paul Ryan, R-Wis., and House Minority Leader Nancy Pelosi, D-Calif., include big retailers such as Wal-Mart, Best Buy, Walgreens and JC Penny down to local and regional grocery and convenience store chains.
In addition to scrapping the Durbin Amendment, H.R. 5983 would make major changes to Dodd-Frank, which is strongly opposed by financial institutions as well as most Republicans. The House Financial Services Committee already is on board, but with the 114th Congress nearing adjournment, even if it clears all remaining Congressional hurdles, the bill stands little chance of being signed by Democratic president Barack Obama before his term ends. That means Dodd-Frank opponents will have to start all over next year.
By then their task could be much easier. Republican president-elect Donald Trump takes office in two months, and Republicans retained control of both houses of Congress in Nov. 8’s elections. But when it comes to debit cards, Republicans may find themselves in the uncomfortable position of having to balance the opposing interests of two traditional allies, banks and retailers.
The retailers paint themselves not as pro-regulation, but as a group that called on government to help fix a system in which “anti-free market practices employed by global credit and debit card brands” set prices, according to the letter. The card networks set interchange rates, which are paid to issuers by merchant acquirers, which in turn pass the cost on to merchants.
“As cornerstones in the business community, we are staunch supporters of free enterprise, and generally do not support any market intervention unless markets are not functioning efficiently,” the letter says. “Credit and debit card acceptance is a prime example of a non-functioning marketplace.”
Apart from PIN-debit networks that have gained traffic under the new routing rules, many in the payments industry oppose the Durbin Amendment. Opponents who decry government intervention claim merchants haven’t passed on their reduced debit card acceptance costs in the form of lower prices for consumers. Even some Democrats question the amendment, says payments consultant and Washington observer Eric Grover, principal of Minden, Nev.-based Intrepid Ventures.
“More than a few Democrats likely are ready to join Republicans in an effort to repeal the Durbin Amendment,” Grover tells Digital Transactions News by email. “Politics is a contact sport. The merchant lobby understands that and has been relentless in pressing its case. The payments industry needs to weigh in forcefully, making an affirmative case that repeal of the Durbin Amendment would be good for consumers.”