Washington, D.C. (Sept. 6, 2016) – A diverse coalition of 407 big and small retailers that create jobs across the nation urged Congress not to repeal reforms that significantly curtail global credit- and debit-card companies’ anti-competitive practices.
These reforms – known as the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act – brought some competition to the market where card companies had blocked their competitors from having the chance to process debit card transactions and price-fixed the fees big banks charge merchants for those transactions.
The reforms have ensured that card companies compete on price and security, but the House Financial Services Committee is now considering legislation to eliminate these reforms as part of a broader plan to repeal Dodd-Frank.
Repealing the debit card reforms would benefit no one but huge card companies and the largest of the large banks, which will be able to exploit again their unfair advantages in this market and subvert free-market principles.
“As cornerstones in the business community,” wrote the retailers, “we are staunch supporters of free enterprise, and generally do not support any market intervention unless markets are not functioning efficiently. Credit- and debit-card acceptance is a prime example of a non-functioning marketplace.”
Reform opened the market by stopping the largest card companies, Visa and MasterCard, from paying banks to block competing card companies from carrying debit transactions.
That promotes competition by ensuring merchants have access to at least two competitive networks for routing their transactions. And banks are free to charge anything they want as long as they don’t use the fees price-fixed by the credit card companies.
If debit reform were repealed, global card companies would tighten their stranglehold on the debit marketplace to inhibit choices and price-fix fees at massive markups. These exorbitant swipe fees raise the price of everything consumers buy, whether they use a card or not, which hurts consumers and businesses large and small.
“Debit card reforms have been a major step in the right direction,” the companies wrote in their letter to Congress, “and any removal of those reforms would be a monumental step in the wrong direction for U.S. businesses and consumers.”
The payment card system is still far from a free market. American merchants pay the highest fees in the industrialized world.
The Durbin amendment was a small step in restoring competition. Congress should reform credit cards next, not dismantle the modest debit card reforms it already put in place.