OPINION:
Todd Zywicki’s recent Op-Ed (“Durbin regulations are aimed at your wallet,” Opinion, June 3) demonstrates a fundamental misreading of the debit card industry and the ways my recently passed interchange fee amendment will reform that industry.
Mr. Zywicki seems to think that the debit card industry is a well-functioning market. It is not. The industry is ruled absolutely by Visa and MasterCard, who have structured it to avoid competition. The result: unreasonable transaction fees imposed on merchants and their customers that pad credit card companies’ profits and subsidize the big banks to the tune of $20 billion a year.
Contrary to the commentary’s assertion, my amendment doesn’t create price-fixing; it corrects it. Currently, Visa and MasterCard fix the interchange fee rates that are received by every bank in their systems each time a card is swiped. My amendment ensures that those rates are reasonable and linked to processing costs, unlike the current system in which Visa and MasterCard can arbitrarily increase rates whenever they want.
The amendment regulates debit fees established only by card networks like Visa and MasterCard. It in no way limits or regulates fees established by issuing banks. Banks can and should be forced to compete with one another over these fees.
Arguing that my amendment will lead merchants to shift costs to consumers ignores today’s reality. Merchants already raise the prices of all goods to make up for the 2 percent to 3 percent of every dollar they lose to interchange fees. Whether they pay by card or cash, consumers today are subsidizing Visa and MasterCard’s multibillion-dollar interchange windfall system. My amendment reduces fees and allows merchants to pass along savings to consumers through discounts now prohibited by the card giants.
Visa and MasterCard hardly have consumers’ best interests in mind when they require merchants to honor all cards for all transactions. Their universal acceptance policy requires merchants to accept their cards no matter how high the interchange fees. My amendment targets the abuse of Visa and MasterCard’s universal fee structure and gives small businesses and merchants the chance to offer discounts for other forms of payment.
The debate over interchange fees isn’t new. It’s been the subject of at least six congressional hearings and two Government Accountability Office investigations, all of which found the current system to be flawed. It’s long past time to rein in the Visa-MasterCard duopoly and provide small businesses and consumers with relief from these unreasonable fees.
SEN. RICHARD J. DURBIN
Assistant Senate Majority Leader
Washington
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