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Durbin to Visa and MasterCard: Stop threatening small banks

28 May 2010  |  11296 views  |  1 wallet

Visa and MasterCard have been accused by US Senator Dick Durbin of threatening behaviour to small banks as the card giants stoke up opposition to his proposals to limit interchange fees.

The Durbin amendment, which was passed last week, would give the Federal Reserve the power to regulate debit interchange fees and free up merchants to offer alternative forms of payment.

"It appears that in an effort to frighten small banks and credit unions into opposing the amendment, your companies are threatening to make changes to your small bank interchange fee rates and to your network operating rules," Durbin wrote. "These changes, which are not in any way required by the amendment, are unnecessary and would disadvantage small card-issuing institutions … The simple fact is that small banks would not be harmed or punished under the amendment unless your companies decide to harm or punish them."

Durbin warned the card schemes that any co-ordinated attempt to change fees and rules in the wake of the amendment "would raise serious concerns that you are engaging in an unlawful restraint of trade".

Comments: (1)

Matt Scott
Matt Scott - RenovITe Technologies Inc - London | 28 May, 2010, 11:51

This takes an interesting perspective.

 

Assuming Visa and MasterCard are forced to reduce Interchange Rates charged to Merchant Acquirers and Merchants - then it will only be natural to expect that the Interchange Payments to Issuers will be reduced as a direct impact.

 

One perspective may be the Cardschemes Bullying the smaller Banks to oppose the Bill, another perspective may be the Cardschemes are warning Banks of the implications the Bill will have to their Business Models.

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