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Retailers Urge House to Reconsider Bills That Would Repeal the Durbin Amendment
July 12, 2016

By Jim Daly

More than 120 retailers sent a letter Tuesday to the U.S. House of Representative’s Financial Services Committee urging the panel to reconsider two measures that would repeal the Durbin Amendment in 2010’s Dodd-Frank Act.

The bills stand virtually no chance of becoming law while Barack Obama remains president, but with political control of Washington up for grabs in November, they do give opponents of Dodd-Frank—as well as its supporters—a new chance to stake out positions on the controversial law enacted in the wake of the 2008 financial crisis.

The letter’s signees include 7-Eleven, Wal-Mart, Target, Best Buy, and dozens of other merchants. All want to retain the Durbin Amendment, which imposed a per-transaction price cap of about 23 cents on the interchange they pay when customers present debit cards issued by banks and credit unions with more than $10 billion in assets. The amendment also requires debit card issuers to offer merchants a choice of at least two unaffiliated networks for transaction routing, a provision amendment sponsor U.S. Sen. Richard Durbin, D-Ill., included to spur network competition and thereby reduce merchants’ card-acceptance costs.

“In an age where electronic payments have become virtually ubiquitous, very few businesses can choose not to accept credit and debit cards and still remain competitive,” the letter says. “This dynamic has enabled global card brands to leverage a business model whereby they can change the rules of card acceptance at any moment. In many instances, these rule changes constitute an enormous free-market intrusion and overstep by limiting the flexibility of card acceptors to make decisions about how to best run their businesses and serve their customers.”

A spokesperson for the merchants says a number of trade groups organized the letter.

The letter came just ahead of a hearing Tuesday for the Financial Services Committeeto review a discussion draft of The Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act sponsored by the panel’s chairman, U.S. Rep. Jeb Hensarling, R-Texas. The bill would replace Dodd-Frank, whose extensive new regulations have drawn fire from Republicans and financial institutions ever since Obama signed it, with more palatable measures.

Meanwhile, H.R. 5465, introduced last month by U.S. Rep. Randy Neugebauer, R-Texas, specifically would delete Section 1075 of Dodd-Frank, which is the Durbin Amendment. A number of financial groups support the bill. Neugebauer chairs the Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit.

Sources familiar with the ways of Washington say that even if the bills pass the House, neither would escape a Democratic filibuster in the Senate or an Obama veto. Instead, with control of Congress and the presidency looming in November, the measures represent a prelude to future fights.

“The merchant lobby is laying down a marker,” says consultant Eric Grover, principal of Minden, Nev.-based Intrepid Ventures. “Merchants are a political force to be reckoned with.”

Indeed, the House bills come at a tumultuous time for the payments industry on the legal and regulatory front. A federal appellate court last month overturned a years-in-the-making settlement between Visa Inc., MasterCard Inc. and some banks on the one side and merchants on the other over credit card interchange and acceptance rules. Hundreds of merchants opposed the settlement as a bad deal. Meanwhile, Wal-Mart, Home Depot, and most recently grocery store giant Kroger have sued the card networks over debit card transaction routing. And the Consumer Financial Protection Bureau, one of Dodd-Frank’s most controversial creations, is expected to release sweeping new prepaid card regulations imminently.

“I credit the merchants, I think they’re feeling emboldened,” says Grover. But he adds that “I’d like to see a little more testosterone in the payments industry making a case that repealing the Durbin Amendment is pro-consumer.” He asserts that Durbin’s interchange price controls have led to higher bank fees and reduced benefits on banking services.

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