Protect Montana consumers: Eliminate the ‘Durbin amendment’

In Montana and across the country, electronic payment methods are more essential than ever before. From our  smallest rural towns to our biggest urban cities, consumers depend on safe and accessible payment methods. 

Right now, there is a major threat to Montana consumers making its’ way through Congress: proposals to extend the routing mandates of the 2010 Durbin Amendment. The Durbin Amendment forced banks to add an unaffiliated payment network to their debit cards and imposed a cap on debit card interchange fees, which banks charge to process debit transactions. These policies were supposed to save money for merchants so they could  lower prices for customers, yet big-box stores gained an extra $90 billion and made virtually no changes to their  prices. This amendment has been hurting consumers for the past decade and the impacts will just get worse if  we allow it to extend to credit cards. 

The Durbin Amendment routing mandate was a huge hit to consumer protection and choice. Before the  amendment, consumers could choose a credit or debit card based on priorities like fraud protection and feel  confident that their payments were being routed only on secure networks affiliated with their bank. Then the  amendment added routing mandates to the debit market, forcing banks to open their cards to unaffiliated payment networks to give merchants more choice in which networks they use to process debit cards.  Unfortunately, many merchants switched to routing their debit payments on whatever the “least-cost” option is for them. This is rarely the most secure option. 

Even worse were the significant financial costs consumers faced after the Durbin Amendment capped interchange fees and forced multiple payment networks onto debit cards, driving networks to lower their  merchant rates to ensure the next transaction routes on their network. Banks saw billion dollar interchange fee losses and scrambled to earn back revenue by cutting free checking and raising fees and account minimum balances. A study from the Government Accountability Office reported that after the Durbin Amendment, big banks raised monthly fees on noninterest checking accounts by about 20 percent and increased the average minimum balance to avoid a monthly fee by 50 percent. In total, a University of Chicago report found that instead of saving money, the Durbin rule indirectly lost consumers between $22 and $25 billion. 

Banking essentially became less accessible for consumers, especially those in low-income communities who depend on low fees to keep their bank accounts open. A 2014 study from George Mason University reported that one million Americans lost their bank accounts after fees increased and free checking decreased.  

Big-box stores are now focused on credit-card routing mandates, which we know from prior experience will end up hurting consumers. Banks would again see huge losses and look for ways to make back their money, such as raising fees and interest rates or tightening up their credit standards. We cannot let credit become more expensive for folks who are already struggling. 

Back in 2011, Sen. Jon Tester recognized the dangers of the Durbin Amendment and tried to implement a period of study to examine any unintended consequences. I hope that Tester will continue this fight and put a stop to credit card routing mandates before they devastate even more consumers. Montanans should not have to worry about the safety of their payments or whether they can afford to keep their bank account open.