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What became known as the Durbin Amendment to the
Insider’sreport Dodd-Frank Act, known at the time as the Wall Street

on payments reform bill, wasn't a free-standing bill prior to negotiations
between the House and Senate over that legislation. Durbin
was then, and remains, the Democratic Party whip, whose
job it is to rally Democratic senators behind the party's
preferred legislation.
Getting ready for He introduced an amendment to that bill to reform the card

industry. The amendment "will enable small businesses
Durbin redux and merchants to lower their cost and provide discounts
to their customers," Sen. Durbin insisted at the time. Of
By Patti Murphy course, history has proven him wrong about lower costs.
ProScribes Inc. Sens. Durbin and Marshall are positioning their joint
legislation as pro-small business and pro-consumer,
day of reckoning is coming to merchant acquir- and they have the backing of the National Federation of
ing. It may not be in the immediate future, but it Independent Businesses. "When it comes to Main Street
is coming. To ignore this eventuality could lead vs Wall Street, I'll choose Main Street every time," Sen.
A to unnecessary government intervention that Marshall said in a statement. "Bringing real competition to
purports to enhance competition but will likely accomplish credit card networks will help reduce swipe fees and hold
the opposite. down costs for Main Street merchants and their customers,"
Sen. Durbin said.
I'm talking about the Credit Card Competition Act of 2022,
introduced in July by Senators Dick Durbin, D-Ill., and If past is prologue, however, that's not the way this
Roger Marshall, M.D., R-Kan. Sen. Durbin is best known legislation will play out. Research conducted by the Federal
in the payments space as the architect of the Durbin Reserve Bank of Richmond a few years after the Durbin
Amendment, the 2010 legislation that ushered in regulation regulations took effect suggested "limited and unequal
of debit interchange and routing. This time around, he's impact on debit costs."
calling for the Federal Reserve to regulate how credit card
transactions get routed. Only about 11 percent of merchants surveyed by the
Richmond Fed saw lower debit interchange; 31 percent
Specifically, Sen. Durbin wants merchants to be able said costs rose; 58 percent saw no change. Merchants with
to choose which payment networks their credit card small-dollar tickets saw the largest increases; interchange
transactions get processed over. The largest credit card on a $7 ticket went from about 16 cents to 23 cents, several
issuers (those with over $100 billion in assets) would need analyses have shown. What's more, the Richmond Fed
to ensure their cards support routing choices of at least two found the vast majority (77 percent) of merchants did not
unaffiliated networks, only one of which is Mastercard or lower prices post-regulation, and nearly 22 percent actually
Visa. increased prices.

I'm not going to delve into the technological and logistical Part of the problem, I suspect, is that financial institutions
challenges that would ensue with passage of the legislation. with assets under $100 billion were exempt from debit
Suffice it to say they would be substantial. Instead, I want interchange regulation—an exemption also written into
to focus on the bill's likely route to passage and the likely the Credit Card Competition Act. These smaller FIs issue
consequences. about a third of all credit cards.

Past as prologue A duopoly, or not
The Credit Card Competition Act is officially pending The new legislation was expected. Sen. Durbin showed
in the Senate Banking Committee. But given the Durbin his hand during a judiciary committee hearing in May.
Amendment’s route into law, it probably won't be put He argued then that Visa and Mastercard were a duopoly.
through the normal legislative vetting process of committee More recently, he said the new legislation would "enable
hearings and voting. innovators to gain a foothold in credit cards."

In fact, neither Sen. Durbin nor Sen. Marshall sits on True, the Mastercard and Visa networks, combined, handle
the banking committee. Sen. Durbin chairs the Senate 70 to 80 percent of the card market. By most definitions that
Judiciary Committee. Sen. Marshall is a first-term senator makes for a duopoly. Interchange is also too high—more
who sits on the Senate Committee on Small Business and than in other countries. But innovators have been able to
Entrepreneurship. gain footholds in the market.

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