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Have the Durbin Amendment’s interchange restrictions cut into debit card revenue at the nation’s smaller financial institutions? In the wake of a spin war touched off on Monday by a merchant-controlled lobbying group, the answer appears to be: It depends on whom you ask.
Monday morning, the Washington, D.C.-based Merchants Payments Coalition, which lobbied heavily in favor of Durbin, sent out a release pointing to a new survey by the Credit Union National Association as proof that the law’s pricing caps have had little or no effect on debit revenue at small banks and credit unions. Interchange revenue from signature-based debit transactions at credit unions has remained level, while PIN-based revenue has dipped “only” 6%, according to the MPC’s reading of the survey. The CUNA survey, which included results from more than 100 credit unions, covered the period from the first quarter of 2010 through the third quarter of last year. The Durbin pricing caps took effect Oct. 1, 2011, under a set of rules released by the Federal Reserve.
Later in the day, CUNA, a credit union trade group also based in the nation’s capital, fired back with a blistering statement calling the MPC release a “gross and pernicious mischaracterization” of its survey.
“Further, the results of our survey show clearly that, in the past year, the growth of interchange income at credit unions slowed considerably and even declined in the latest quarter, despite persistent growth in the total number and dollar volume of credit union debit card transactions,” the CUNA statement goes on to say. “This is because per-transaction debit interchanges rates began to decline as soon as the Fed’s rule took effect, and this decline has accelerated in the most recent quarter.”
In its release, the MPC cited a recent article about the CUNA survey that appeared in Credit Union Times, an industry trade magazine, referring to the magazine as a CUNA publication and saying the article supported the MPC’s conclusion that credit unions have been little affected by Durbin . CUNA’s statement points out that the article details what it calls a “hit” to interchange revenue credit unions have begun to sustain from Durbin. CUNA adds that the publication is an independent enterprise. Indeed, it is owned by Summit Business Media, a New York City-based publisher with no ties to CUNA.
The MPC did not respond to a request for comment from Digital Transactions News. Formed in 2005 specifically to lobby on Capitol Hill for interchange reform, the MPC represents 26 national retail trade groups as well as dozens of state organizations.
Besides Washington, D.C., CUNA also maintains an office in Madison, Wis.
Passed in 2010 as part of the sweeping Dodd-Frank Act, the Durbin Amendment imposed limits on debit card interchange for issuers with $10 billion or more in assets. Nearly all credit unions fall under that threshold. Nonetheless, small banks and credit unions have fiercely opposed the law, fearing that market forces would ultimately drive down their interchange income as merchants increasingly steered transactions to lower-cost cards from big issuers. The Pro-Durbin camp, which includes most major retail trade groups and retailers as well as the MPC, have been just as eager to show that the law’s exemption for small issuers is working to their benefit.
The law also requires that all issuers, regardless of size, support at least two unaffiliated networks for debit-transaction routing. That provision, which took effect April 1, 2012, hands merchants the ability to steer transactions to lower-cost networks, as well, and may play a role in holding down interchange for exempt issuers, in the view of some observers.
