Why should anyone in the state of West Virginia care about credit card routing mandates and the fact that Congress is looking at the issue? They should care because if routing mandates are implemented on credit cards — it will cost you money.
We need to make sure our leaders in Washington, D.C. are passing fiscally prudent policies that protect consumers and banks and that our representatives are not voting for laws that cater to large corporations. That is why I hope Congress will reject the effort to implement routing mandates on credit card transactions.
This effort echoes what occurred in 2010 when the Durbin Amendment was added to the Dodd Frank Bill. This harmful policy created routing mandates on debit cards and capped interchange fees on transactions. Both moves ended up costing banks billions of dollars in revenue.
To make up for this downturn in revenue, banks had to pass those losses on to consumers in the form of an increase in minimum balances, an increase in monthly fees and a reduction in the availability of free checking. This marginalized customers and made it more difficult for low-income families to open or maintain checking accounts. One study by George Mason University reported that about 1 million Americans were kicked out of the banking system because of the Durbin Amendment.
Consumer protection also suffered because of the Durbin Amendment. The banks were forced to add “unaffiliated” networks to their debit card processing systems. This gave retailers the ability to choose the network on which they would route the debit payment. It was no surprise when many opted to go with the least expensive option. The least expensive option for the debit card routing was rarely the most secure for the consumer.
The Durbin Amendment was passed to save major retailers money so they could pass those savings on to the consumers. But, according to a Federal Reserve Bank of Richmond study, nearly 100 percent of the retailers failed to lower prices. Some even raised prices. Big retailers such as Amazon saved an additional $90 billion because of this policy. Consumers and banks got nothing in return.
And now the big box retailers are at it again, trying to extend the Durbin Amendment routing mandates to credit cards. We will see the same consequences. Banks will lose billions of dollars. This will in turn mean the losses are passed on to consumers in the form of higher interest rates on credit card transactions, an elimination of free credit cards and a reduction in points.
We know today that the Durbin Amendment failed to accomplish its goals. It did nothing for everyday Americans. Armed with this knowledge, we should know better than to try to extend the routing mandates to the credit card market.
Grant County Bank does not issue credit cards. But, as a financial institution here in the region, we advocate for our customers. We do this because the people who bank with us are not just our customers. They are our neighbors, our friends and our family. That is why we advocate for sound policies that will benefit them and it is why we hope our delegation to Washington, D.C. oppose the move to add routing mandates to credit cards.
