While the primary focus in Washington, D.C., has been the replacement of the Affordable Care Act, there is another piece of legislation that had the potential to backfire on Americans everywhere. The Financial CHOICE Act, a well-intentioned bill to repeal many of the burdensome elements of the Dodd-Frank Financial Reform Act, originally included a provision to repeal debit-card swipe-fee reform, also known as the Durbin Amendment.
The repeal of the Durbin Amendment would effectively end debit-card swipe-fee reform, enabling the big banks and credit card companies to double the cost of accepting debit cards as a form of payment. This reform was one of the few positive outcomes from the Dodd-Frank Act. By limiting the ability of big banks and credit card giants to impose massive and arbitrary fees on debit card transactions, this amendment was a huge win for Main Street and an effective blow to Wall Street.
Thankfully, that provision has been withdrawn by the chairman of the House Financial Services Committee, U.S. Rep. Jeb Hensarling, R-Texas. Prior to the withdrawal, Maine’s U.S. Rep. Bruce Poliquin stood up to Chairman Hensarling over the repeal of swipe-fee reform, urging him to discuss this issue separately when the bill came to the House floor. The chairman responded that, “As [the CHOICE Act] proceeds along the legislative process to the House floor, I will encourage that all sides be heard and that the issue be thoroughly vetted.” Although Poliquin voted to advance the bill out of committee, his efforts to make sure the Durbin Amendment would be openly debated on the House floor enabled other House Republicans to indicate that repeal of the Durbin Amendment could jeopardize the bill.
Poliquin was the only Republican on the Financial Services Committee to vote against a previous version of the CHOICE Act last year because of the inclusion of the Durbin Amendment.
A few years ago, the swipe fee marketplace was in dire need of a more level playing field, and the Durbin Amendment accomplished just that. In fact, the Durbin Amendment lowered debit card swipe fees from an average of 40 cents per transaction to 24 cents per transaction. The fees should have been lowered to 12 cents per transaction, but the big banks encouraged the Federal Reserve to double the amount. Prior to the passage of the Durbin Amendment, merchants saw escalating costs for both debit and credit card transaction fees, and they were powerless to stop it.
Those same banks and the credit card companies poured millions of dollars in an effort to repeal swipe-fee reform, arguing it is good for business. Thankfully, Congress heard loud and clear from retailers and consumers that the Durbin Amendment is an important piece of legislation.
Back when the Durbin Amendment passed, the banks claimed it would be cripple the banking industry and be the end of free checking. But in the last five years, have you seen more bank and credit union branches be built or retail locations? Did you see the end of free checking? Maine’s small businesses already operate on razor-thin margins of an average of 3 percent, whereas the credit card giants, like Visa or MasterCard, rake in margins of up to 47 percent. Of course, they wanted to repeal swipe-fee reform. The Durbin Amendment cut into their profits and thwarted their attempts to impose excessive fees on every transaction.
From the perspective of small retailers and average Americans, though, debit-card swipe-fee reform has been a huge success. Capping the amount banks could charge every time consumers swiped their cards generated $5.8 billion in consumer savings and created 37,000 jobs in just its first year alone. Turning back the clock on swipe-fee reform means consumers would pay more every time they use debit cards, whether it’s at the gas station or a local coffee shop. Main street retailers and consumers are pleased that their voices were heard and that the Durbin Amendment will continue to be the law of the land.
Curtis Picard is the executive director of the Retail Association of Maine.