MasterCard rounds on Durbin amendment

Now that the Senate has approved The Financial Regulatory Reform Bill, MasterCard urges House and Senate conferees to reject the amendment tacked on by Senator Dick Durbin, which will hurt the people and businesses it is supposed to protect. Consumers, community banks and credit unions will all pay if this thinly-veiled attempt by merchants to increase their profitability at their customers' expense becomes law.

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"The real harm for consumers and small businesses, beyond just losing rewards, will likely be higher annual fees, per transaction charges to use a debit card, less access to credit and for many consumers, the end of free checking accounts."

"The amendment is a shrewd but cynical approach to getting American consumers to pay big-box merchants' fair share for the benefits these merchants get from electronic payments. There's a price-tag on this bill, and it will be paid by the American consumer," said Noah Hanft, MasterCard general counsel.

"If American consumers have any doubt about who will pay the bill, they should ask Australian consumers, who saw their annual fees rise significantly and rewards shrink after the government there put artificial controls on interchange fees. At the same time, there's no evidence that merchants there lowered prices to reflect the cut in fees.

"The amendment is ill advised and will end up hurting the same people the larger bill aims to protect so we urge Conferees to consider its severe consequences for consumers," Hanft said.

This amendment was tacked on to the Senate version of the Financial Regulatory Reform Bill at the last minute, with no committee hearing to discuss its impacts and complexities. In a recent report prepared at the request of Congress, the General Accounting Office recognized that regulating interchange fees presents significant challenges, and could hurt both consumers and merchants.

"We believe that many of the Senators who voted for this amendment now understand that it will harm consumers and punish banks on Main Street because the 'carve-out' for banks with assets below $10 billion is a sham," Hanft said. "What this amendment does is make debit costlier and shopping more complicated for consumers, while letting merchants reap the benefits of card acceptance at a bargain-basement price.

"The real harm for consumers and small businesses, beyond just losing rewards, will likely be higher annual fees, per transaction charges to use a debit card, less access to credit and for many consumers, the end of free checking accounts."

Because the interchange price controls also extend to prepaid cards, the amendment would likely result in significant harm to millions of Americans who are unbanked and underprivileged and rely on prepaid cards for government benefits like social security payments or food stamps, or even their paycheck.

"Consumers could also be forced to spend more than they planned if they don't have cash in their pocket and the merchant enforces a minimum at the register, or they could be told the merchant doesn't accept their chosen card anymore," Hanft added.

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