Senators, coalition say whoa! to Durbin Amendment

A bipartisan group of U.S. senators introduced legislation March 15, 2011, calling for a two-year delay in the implementation of the Federal Reserve's rule on debit interchange so the implications of the rule can be studied further.

The bill, called the Debit Interchange Fee Study Act, is being sponsored by Sens. Jon Tester, D-Mont.; Bob Corker, R-Tenn.; Jon Kyl, R-Ariz.; Ben Nelson, D-Neb.; Tom Carper, D-Del.; Pat Roberts., R-Kan.; Chris Coons., D-Del.; Mike Lee, R-Utah; and Pat Toomey, R-Pa.

In December 2010, the Fed proposed a set of rules implementing the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act that offered two options for capping interchange. Each option has a cap of 12 cents per transaction, reflecting a 70 percent reduction in the average 44-cent debit card interchange assessment in 2010, according to the Fed's calculations.

"The stakes are simply too high to move forward with this rule without a closer look at the impact on consumers, credit unions, community banks, and the small businesses and jobs they sustain," said Tester, a member of the Senate Banking Committee, in a statement. "That is why we need to make sure we stop and study these proposed rules before implementing anything."

The Dodd-Frank Act requires final rules related to the interchange fee provisions to be issued by April 21, and that the rules become effective on July 21.

No implementation, please

In a related development, a coalition of bank and credit union trade associations filed a friend-of-the-court brief supporting TCF National Bank's lawsuit seeking an injunction preventing enforcement of the Durbin Amendment. TCF filed the suit on Oct. 12, 2010, and the suit is currently pending in the United States District Court for the District of South Dakota.

Among the associations joining the brief are The Clearing House Association, the American Bankers Association, the Consumer Bankers Association, the Credit Union National Association, the Mid-Size Bank Coalition of America, The Financial Services Roundtable, Independent Community Bankers of America and the National Association of Federal Credit Unions.

A statement from the coalition about the brief claimed that the Fed's rules, if implemented, would cost banks and credit unions approximately $12 billion per year, result in increased bank fees and costs for consumers, and deprive a significant number of consumers of access to debit as a form of payment.

According to Eric Richard, Executive Vice President and General Counsel for the Credit Union National Association, the unanimity of the various trade associations in filing the brief was unusual and sent a strong message. "This helps show the judge that basically the entire financial services industry is united with their concern about this law," he said.

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