Dear Senator Durbin,
I’m writing you as a long time advocate for the poor and as a business owner of a debit card service for the under-banked. The mission of my business is to provide millions of Americans access to debit cards with transparent low pricing and services that help our users budget, build credit, buy affordable healthcare and participate in the US economy in a way that the rest of us take for granted. I started the business when no one believed it in, seven years ago, after seeing and hearing of the indignity and hardship caused the 80 million Americans who are left out of the banking system.
With that background, I am gravely concerned about the potential unintended consequences of the “Durbin Amendment” to the Senate financial reform bill that just passed and is going into conference committee with the House next week.
Let me say from the outset, that I have no stake or interest in the politics of regulating large banks, or the various lobbying efforts on their behalf, or on behalf of large retailers who want to see interchange fees reduced. However, I am extremely concerned about the potential impact of the amendment, if left unmodified, on the ability of community banks, credit unions or specialist providers to the under-banked to provide card services at affordable rates. That in turn would hurt the poor and the underserved by either raising fees or limiting the availability of this vital service. This would have a grotesquely unfair impact on the most vulnerable and the most heavily hit consumers, including minorities. I would be compelled to fight this publicly and actively.
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On May 27, the heads of the Independent Community Bankers Association and the Credit Union National Association wrote you a letter that greatly alarmed me. Their logic is that the carve-out in the amendment for financial institutions with less than $10 billion in assets, as currently written, would not work, because:
1. The card issuers, Visa and MasterCard, may not have the means, or the willingness, to make the distinction between institutions in processing payments and sharing interchange revenue
2. Merchants, who currently accept a blended rate of fees could – and would have an incentive – simply refuse to honor the cards of smaller institutions unless the fees are reduced and favor their own cards, often issued together with larger banks
3. The larger debit card providers would raise fees on and further cut services to the poor at the worst possible time, while there is no guarantee that the savings to retailers would be passed on.
4. Smaller institutions currently using large banks for interchange transactions would have to scurry to find new clearing banks not subject to the amendment – and some might be contractually obligated to stay with a larger bank for a fixed period.
Therefore it is absolutely imperative that the amendment either be amended significantly to legally protect the smaller community and cooperative institutions or be scrapped altogether.
I have read your letter to the CEO’s of Visa and MasterCard of May 27. My first reaction was that you are being very tough with a partner of ours, Visa, who have been extremely constructive with my company in providing debit cards to the poor, and contributed not one iota to the crisis the overall bill is trying to address. My second reaction was that while your clarification of the carve-out is welcome you are basically threatening litigation under restraint of trade or antitrust laws rather than putting an affirmative obligation on, and transition period for those companies, into the law itself. This simply is not going to work on a practical basis,
