PAYMENT CARD INTERCHANGE
- ICBA strongly opposes efforts to have the government set or limit payment card interchange or other fees, mandate interchange fee disclosure to consumers, or create antitrust exemptions allowing merchants to “negotiate” or “operate” in anti-competitive and collusive ways to the detriment of community banks and their customers. Government intervention should not provide one payment card type advantages over other payment card types.
- ICBA strongly supports a payments card operating environment governed primarily by network rules to ensure a well functioning and balanced payment card system that provides tremendous benefit for community banks, their customers and millions of merchants of all sizes.
The payment card interchange system in our country was working well, providing tremendous benefit to American consumers and merchants of all sizes and types until the Durbin Amendment to the Dodd-Frank Act imposed price controls on debit card interchange. For the first time in the industry’s history, the government is effectively setting the price in a business-to-business transaction.
On July 31, 2013, the U.S. District Court for the District of Columbia ruled in favor of merchant plaintiffs and struck down the interchange fee limitations and network exclusivity provisions of the Federal Reserve’s Regulation II, Debit Card Interchange Fees and Routing. The appeal will be heard by the D.C. Circuit Court of Appeals on an expedited basis which could result in a decision as soon as the summer of 2014. The existing rule remains in place during the appeals process.
ICBA is an active participant in a broad coalition of financial institution trade associations opposing government intervention in the debit interchange market. The coalition has filed friend-of-the-court briefs and participated in oral arguments at each stage in the judicial process and will continue to do so.
The verdict is still out as to whether the small debit card issuer exemption from the interchange fee cap is indeed shielding community banks from the negative impact of government price-fixing. If the district court’s ruling stands, the threat of harm to the community banking sector is even greater. Despite a settlement between merchants, payment networks and large banks in their credit card class-action case, merchants continue to want to pay less for the benefits they receive when they accept payment cards. Merchants are vigorously pursuing various legislative strategies to further shift their payment card interchange costs to consumers, and are likely to continue to push Congress to regulate credit card interchange fees and further weaken payment network rules in the future. If merchant efforts are successful, community banks and their customers will pay more to provide merchants, especially larger ones, with those benefits. Retailers like Wal-Mart should not be given an even greater ability to squeeze local small businesses on margin, nor should community bank customers be forced to subsidize that anti-competitive behavior.
ICBA remains actively engaged in the legislative, regulatory and judicial processes and continues to work to prevent large retailers from further damaging the electronic payments system.