“Durbin 2.0” Reboot Will Kick Consumers, Taxpayers, in their Wallets

Upon the introduction this week of legislation from Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) imposing federal “routing mandates” that would destabilize the credit card market, NTU warned that consumers, taxpayers, and the health of the U.S. financial system are more at risk than ever before by this scheme. NTU President Pete Sepp offered the following statement in opposition to the bill.

“Supporters of ‘Durbin 2.0’ can try to portray government interference in private-sector transactions as ‘encouraging competition,’ but outside the Beltway, sensible people know better. They understand that in the real world, federal policy that forces new rules on a market to hobble providers of a service can have all kinds of unintended consequences. 

The price controls on transaction fees imposed by ‘Durbin 1.0’ a decade ago have failed dismally to live up to their promise of  increasing consumer choice and cutting costs for debit cards. In fact, two years into Durbin 1.0, nearly 70 percent of card issuers ended their rewards programs, while virtually none of the proposed savings from price controls were passed along to customers.

Now supporters of ‘Durbin 2.0’ want to try again with a new form of price control – routing mandates – this time for credit cards. This approach will fail just as dismally as before, and likely even worse. With inflation still a major concern for American families, how will taking away the very reward programs that help consumers better afford everything from gas to groceries possibly help? Or, what if those programs are preserved, but other types of fees on cards become more commonplace so that issuers can keep up with funding security improvements to their networks? Consumers will be no better off. 

Meanwhile, taxpayers could come out on the short end too, as good deals on the purchase cards used by government employees start to dry up. In the end, price controls have never been a workable, lasting response to inflation – calling these government restrictions by another name doesn’t change historical reality.

The interests supporting Durbin 2.0, mostly merchants, mistakenly believe that more government intervention in the way retail business is run will help them. They should focus instead on changing the government policies that already hurt them, such as deficit spending, trade restrictions, unwise labor regulations, and uncertain tax laws

As NTU has said before, Durbin 2.0 is an overbearing solution to a nonexistent problem. Markets can establish a price for secure card payment networks with the benefits consumers want, far more efficiently than government ever could. In fact, other problems in our economy will become even more painful if this legislation advances. Taxpayer advocates in Congress should not allow that to happen.”

NTU was an early and vocal opponent of the first 'Durbin Amendment' aimed at debit cards, outlining several consumer and taxpayer interests in the issues surrounding interchange and routing. For further details visit ntu.org.