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Expansion of the Durbin Amendment to the credit market will lead to less spending power for consumers, CUNA, the American Association of Credit Union Leagues, and all credit union Leagues wrote to the Senate Judiciary Committee Tuesday. The committee is conducting a hearing Wednesday on interchange fees.
The Durbin Amendment caps debit card interchange fees and imposes routing requirements on networks. Proposals have been put forth to expand these regulations to credit cards, which credit unions strongly oppose.
“Interchange keeps consumers, merchants, and financial institutions safe. These fees cover the cost of fraud detection, credit monitoring, and fraudulent purchase protection that make consumers and merchants whole when bad actors attack,” the letter reads. “The robust security features that make credit cards so appealing to consumers come at a cost. While interchange fees cover those costs now, a potential reduction in those fees, when coupled with an alarming rise in fraud, poses a real threat to data security.”
The letter adds that merchants paying an interchange fee is the cost they incur for the service of using the card network.
“Imposing additional compliance burdens or capping the rates charged for the service provided would have an outsized impact on credit unions’ ability to provide card services with at least 15% of credit unions reducing or eliminating their credit card programs,” the letter reads.
Approximately 1% of merchants have passed Durbin Amendment savings to consumers through reduced prices, according to a study from the Federal Reserve Bank of Richmond. Further, a Governmental Accountability Office study found that Durbin Amendment regulations were associated with higher-cost checking accounts and the decrease of fee-free accounts.
CUNA submitted a joint letter with several other organizations earlier this week and submitted its own comment letter as well.
CUNA issued an action alert calling on credit unions to share information on how members rely on payment cards and the barriers that would arise with any Durbin Amendment changes.