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ICBA to Senate on Interchange: “Carving Out” Community Banks Will Not Help Main Street

Washington, D.C. (May 12, 2010)—Independent Community Bankers of America (ICBA) Chairman Jim MacPhee, CEO of Kalamazoo County State Bank in Schoolcraft, Mich., and Camden R. Fine, ICBA president and CEO, issued this statement today on the myth that a $10 billion small issuer “carve out” added to an interchange amendment offered by Sen. Richard Durbin (D-Ill.) would help community banks.

“While we appreciate Sen. Durbin’s efforts to exempt community banks from the harmful impact of his amendment, the fact is that the purported ‘carve out,’ no matter how large, would simply not help consumers and their local community banks.”

“For issuers, the current interchange system makes it possible for community banks to serve their customers because the card networks apply the same interchange rates to small issuers that they do to large issuers.  This means that on an identical $10 transaction, a megabank would receive the same interchange as a community bank.”

“Sen. Durbin’s amendment requires the government to regulate debit interchange for the megabanks. That means unregulated community bank cards become the most expensive cards for merchants to accept. Because the other provisions in the bill remove consumer protections, large merchants are encouraged to accept only the cheaper cards and either refuse to accept the more expensive community bank-issued cards or set enormously high minimum payment amounts for use of a community bank-issued card.  Also, nothing would stop card networks from simply applying the artificially lowered interchange rates across the board to all issuers, regardless of size.  Both of these eventualities will force many community banks to reevaluate their ability to offer debit and credit cards.  This is a lose-lose for community banks and their customers and is why the Senate must oppose this amendment and its ‘carve out,’ which does not work.” 

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