Understand the role of swipe fees and their benefits to consumers
Today more than ever, improving the accessibility and affordability of fundamental banking services must be a priority for our elected officials. We’ve seen how banking can empower individuals in our state to pursue their dreams of owning a home, starting a new business, and saving for retirement. These services are especially important to rural Missouri communities.
It is extremely disappointing to see special interest groups and big box retailers trying to extend the Durbin Amendment to credit cards. Credit card interchange fees are added to every credit card transaction to compensate issuing banks. This allows banks to provide vital banking services right here in local Missouri communities, such as consumer rewards and anti-fraud measures.
In 2010, Congress passed the Durbin Amendment and set hard caps on debit card interchange fees — fees that retailers pay to debit card issuers like community banks to process debit card transactions. debit. The negative effects were immediate as debit card programs were forced to change as little or no savings were ultimately passed on to consumers by merchants. Mega-retailers like Amazon and Walmart told Congress that price caps on exchanges would allow them to lower prices for consumers, which never happened. Instead, retailers kept their prices in place and simply used the savings to inflate their results.
The Durbin Amendment is among the five most rated laws and regulations as having significantly affected the cost and availability of basic financial services and having had a negative impact on consumers. More importantly, the price caps and card routing regulations of the Durbin Amendment have taken valuable resources away from smaller banking institutions to line the pockets of mega-retailers who are making record profits. It is estimated that card issuers have lost $106 billion over the past decade as consumer options and access have diminished.
Earlier this year, the Government Accountability Office, an independent government agency, published a study which found that exchange regulations on debit card purchases were ranked among the most harmful laws negatively impacting the availability of fundamental banking services. Falling interchange revenue means smaller banks can no longer afford to offer popular services such as free checking accounts, low minimum balances and debit card rewards programs. George Mason University found that the Durbin Amendment increased our nation’s unbanked population by one million Americans.
Now Congress is seeking to replicate the Durbin Amendment by reducing and capping interchange fees for credit cards. They argue it will help consumers weather inflation and an economic downturn. Unfortunately, that didn’t happen the first time the Durbin Amendment was passed, and it won’t happen this time. If lawmakers are so interested in helping Missouri consumers during this economic downturn, why haven’t they looked at the failure of merchants to pass on the savings to consumers promised in the Durbin Amendment?
We have more than a decade of research clearly showing that the Durbin Amendment is bad policy that directly harms the ability, especially for people in rural Missouri, to access affordable banking services. We know that extending redemption caps to credit cards would threaten another popular banking service that Americans love: credit card rewards. Several studies have shown that credit card rewards programs, such as cash back and travel programs, benefit all income levels and are especially important for consumers trying to save money when prices rise due to inflation.
Now is not the time to reduce consumer access to financial services or to reduce the ability of community banks to guarantee the security of these services. Consumers have paid the price for the Durbin Amendment over the past decade. We should no longer pay the price.
We need Senators Roy Blunt and Josh Hawley to sit down with community bank leaders across the state to learn more about the essential role of interchange fees. Our elected leaders should do all they can to expand access to credit services in underbanked communities, without restricting them in favor of big-box retailers.
Max Cook is CEO of the Missouri Bankers Association and Jackson Hataway is president of the association.