An Update From Our Capitol Confidentials: The Durbin Amendment
Friday, May 12th, 2017 and is filed under Blog, Economy, Issues
There are whispers of an attempt, by some in House leadership, to shield members from a tough vote on the Durbin Amendment this upcoming week.
What is the Durbin Amendment, you ask?
The Durbin Amendment was included in the notorious Dodd-Frank legislation passed in 2010. The sponsor, Sen. Dick Durbin (D-IL), offered the amendment that required the Federal Reserve to limit fees charged to retailers for debit card processing, also known as interchange fees. On one hand merchants wanted this left uncapped as the fees cut into their profits. On the other hand banks opposed the Durbin Amendment because they received billions of dollars a year from credit card swipe fees.
Prior to the Durbin Amendment, these credit card swipe fees were determined by the market, not price controls set by the government.
Notice fewer low cost checking accounts?
Notice higher minimum balances for checking accounts to avoid fees from your bank?
If so, you can thank the Durbin Amendment. In typical Washington-style omniscience, the attempt to cap swipe fees to benefit the consumer had the exact opposite consequence.
Because the Durbin Amendment effectively settled the issue in favor of the retailers, banks were left with one of two options: reduce costs now that the interchange fees were no longer coming in or pass those fees onto consumers.
New minimum balance requirements, higher fees and fewer rewards programs were the result.
Fast forwarded to the current political context. Controlled by big business, both parties are trying to figure out how to settle this dispute that they got themselves into in the least noticeable way. Many advocates for the institution of Congress will say that Members of Congress have one essential and fundamental duty-voting.
Chairman Jeb Hensarling, on May 4th, passed the financial CHOICE Act
which did not include the Durbin Amendment. Noticeably, the Committee’s press release ridicules bank bailouts and even mentions the exact symptoms of the Durbin Amendment, but doesn’t mention the committee’s decision not to include it. In fact, no member
of the Financial Services Committee offered an amendment to include the provision.
This is where the worst of Washington exposed itself. There is now chatter about allowing the House Rules Committee to included an amendment, without a public floor vote, that would put the Durbin Amendment back in the baseline text. This would be a terrible mistake given Chairman Hensarling’s CHOICE Act that is widely respected as a huge step in the right direction.
Some members, on both sides of the aisle, are ardently for price fixing and capping the interchange fee. Fewer, mostly conservative lawmakers, are ardently opposed because they are opposed to price fixing, but also because of the negative effects on low income checking account holders. Undoubtedly, it would be a tough vote. We now know from our Capitol Confidential sources that a whip operation has already been launched by the House GOP leadership.