Possible Next Steps on Durbin Interchange Amendment

 

The dust is settling after yesterday’s hearings in both the House and Senate on the Federal Reserve Board’s (FRB) proposed rule to curb debit card interchange pricing and network routing.

A bipartisan consensus emerged that can be summarized as follows:

• Nine months is not sufficient time for the FRB to propose and finalize a rule this complex and with this many stakeholders
• Objective observers, including FRB Chairman Ben Bernanke, and FRB Governor Sarah Raskin can provide no assurance that merchants will pass along interchange savings to consumers
• The $10 billion or less exemption from interchange limits for small cap issuers may be unworkable and may not only harm consumer payment choices, but small financial institutions as well

A majority of members from both sides of the aisle, who serve on the House Financial Institutions and Consumer Credit Subcommittee, expressed a “stop and study” concept during Thursday’s, at times, pointed questioning of FRB Governor Sarah Raskin. In each case, her reply was that any decision to delay implementation of the Durbin Amendment lies with the Congress and not the Fed.

Raskin is certainly correct here. Comment letters on the FRB’s proposed rule are due February 22. Under Dodd-Frank, the FRB must publish the final rule by April 22 and the implementation date is July 21. This timeline would give Congress about five months to pass an implementation delay bill and send it to President Obama. In the legislative process, five months is not a great amount of time, especially given the Senate’s deliberative nature and likely strong opposition to such action from Sen. Durbin.

Moreover, will Congress consider an implementation delay bill as a stand-alone piece of legislation or part of a larger Dodd-Frank “corrections” package?  This question will likely be answered in the coming weeks. Given yesterday’s events, it is safe to assume momentum is on the side of those wanting to “stop and study” the effects of the Durbin amendment but significant hurdles to such action remain.

Possible Next Steps on Durbin Interchange Amendment