Prior to the Durbin amendment, pricing on debit card interchange was tied to the market, which allowed banks to support consumer benefits such as low-cost checking accounts and debit rewards programs. Once Durbin’s one-size-fits-all rate cap was instituted, however, Nichols said that unintended consequences came in the form of less flexibility for small businesses and higher compliance costs for banks – with consumers faring poorly.
Once the interchange funding… was diverted to retailers, consumers noticed new minimum balance requirements, higher fees and fewer rewards programs. The Durbin Amendment has made it harder to obtain low-cost mainstream banking services, especially the protections of a debit card-linked checking account. Retailers had promised to offset these consequences by passing their savings onto consumers through lower prices -- which has not happened.
Echoing a letter from the state bankers associations last week, Nichols called on Congress to support H.R. 5465, a bill recently introduced by Rep. Randy Neugebauer (R-Texas) that would repeal the amendment.
Read the op-ed.