Iwrite to express the 362,000-member National Taxpayers Union’s (NTU’s) strongsupport for suspending implementation of Section 1075 of the Wall Street Reform and Consumer Protection Act. Doing so would allow Congress sufficient time to consider thesevere harm that proposed price controls on debit-card interchange transactionswould inflict upon consumers, taxpayers, and the economy. For this reason, NTUurges you to swiftly enact S. 575, the Debit Interchange Fee Study Act,introduced by Senator Tester (D-MT) along with a bipartisan coalition of 13lawmakers.
Asyou may know, NTU opposed the Wall Street Reform and Consumer Protection Act onmany fiscal and economic policy grounds. We have also outlined specificobjections to Section 1075, embodied in February 22 comments to the Board ofGovernors of the Federal Reserve. In these remarks we noted that:
[C]onsumers should be free to choose from a full range of options– whether they are credit cards, debit cards, credit unions, so-called ‘paydayloans,’ or other services – based ontheir own circumstances and preferences. However, through the proposedinterchange regulations, the hand of government referred to earlier would tipthe scales, and in so doing create an imbalance that detrimentally influencesconsumers’ decisions. The result would, in many cases, be deadweight losses tothe economy, as individuals and businesses choose less efficient paymentmethods because debit transactions are no longer as attractive to them.
Even ifyou agree with the direction of the Wall Street Reform and Consumer ProtectionAct, myriad reasons exist to support S. 575. In a December 2010 letter toFederal Reserve Chairman Bernanke, the House author of the Act Barney Frank(D-MA) cautioned that “the implementing regulations for [Section 1075], if notproperly crafted, may have unintended consequences for consumer choice, theprotection of consumer information, and Congress’s intent to reduce burdens oncommunity banks, credit unions, and government benefit programs.” CongressmanFrank’s reference to benefit programs is an often-obscured point in the currentdebate, but one which greatly interests NTU. As we expressed in our February 22comments, “the effect of theseregulations on the availability and utility of debit cards in government purchasing– and the potential effect on overhead costs to taxpayers – deserves furtherexamination.” Another factor that merits exploration is whether such rulemakingwould render debit cards less efficient for processing government payments toindividuals in the future.
Subsequentto the publication of Congressman Frank’s letter, regulatory agencies, consumeradvocates, and free-market organizations have voiced a variety of increasinglyintense concerns about Section 1075. The provision has even triggered a majorconstitutional challenge on Fifth Amendment grounds. Fortunately, S. 575 is anentirely sensible, measured response to the considerable controversy that hasarisen since interchange fee language was hastily folded into what became knownas the Dodd-Frank legislation. Senator Tester’s bill would provide a prudent“time-out” from the rushed rulemaking process to afford thorough study(involving several regulatory authorities) of many aspects surrounding debitinterchange transactions, including economic costs, privacy, and marketplacehealth.
S. 575would provide the kind of guidance Congress should have had available to itprior to consideration of the Dodd-Frank legislation. Now that sweeping interchangerules with questionable viability loom large over our still fragile economy,passage of Senator Tester’s bill or its equivalent language is all the moreimperative. Accordingly, NTU endorses S. 575; roll call votes on the DebitInterchange Fee Study Act will be significantly weighted in NTU’s annual Ratingof Congress.
Executive Vice President