Durbin is back with interchange fee bill

WASHINGTON (6/11/09)—As he pledged to do when his interchange fee amendments failed to be included in a credit card bill passed into law in May, Sen. Richard Durbin (D-Ill.) has resurrected legislation that could impose government limits on the rates set for credit and debit card processing—i.e., interchange fees.

The new bill, S. 1212, is very similar to one Durbin introduced in the last Congress, right down to its name, the Credit Card Fair Fee Act. It proposes to establish a full-time panel of three Electronic Payment System Judges to intervene in disputes between card service providers and merchants regarding fees set for use of the electronic payments system.

The tribunal would have broad power to determine access rates and terms and to impose civil money penalties on any party deemed to be out of compliance with its authorities.

The Credit Union National Association (CUNA) has said that such a tribunal would be costly and would serve to impose government decisions on a system that is more appropriately governed by the market.

CUNA Senior Vice President of Legislative Affairs John Magill said Wednesday, "We will continue to reach out to Sen. Durbin and other senators to stress the importance of interchange to credit unions and their 92 million members."

Along with CUNA, all members of the Electronic Payments Coalition and the U.S. Department of Justice have been among opponents of the "fair fee" legislation. "The merchants' effort to avoid paying their fair share of electronic transactions threatens the integrity of the payment processing system. Our consumer members value the debit cards and credit cards issued by their credit union," Magill said.

He added, "We will do everything we can to ensure our members are not adversely affected by the merchants' legislative strategy to reduce the merchants' obligation in the marketplace."

Proponents of the legislation, such as the large National Retail Federation, argue that the savings merchants might realize on interchange fees would benefit consumers. However, according to CO-OP Financial Services President/CEO Stan Hollen in 2008, "Past experience with similar legislation in Australia suggests the merchants did not pass any interchange reduction on to consumers."