Durbin Pushes to Attach His Credit Card Routing Proposal to a Senate Defense Bill

Indications emerged late last week that Sen. Richard Durbin, D-Ill., has embarked on a strategy for his credit card routing bill that follows a path similar to one he forged a decade ago for his rules governing debit card routing. The veteran senator, along with co-sponsor Roger Marshall, R-Kan., have filed a proposal to amend the pending National Defense Authorization Act with language that virtually copies the Credit Card Competition Act they introduced this summer, according to reporting over the weekend by The Wall Street Journal.

The Senate, which will reportedly start debating the defense bill next week, will now have before it an amendment that requires that merchants have at least two unrelated networks for credit card transactions. The Durbin-Marshall legislation as currently drafted applies to banks with $100 million or more in assets, requiring them to open credit card transaction routing to at least one network that isn’t Visa or Mastercard. A virtually identical bill was introduced last month in the House of Representatives.

Durbin’s aim is to reduce credit card processing costs for merchants by reinforcing competition for transactions, but critics of the legislation argue it will introduce new harms, including interference with market pricing and a potential reduction in or elimination of rewards for credit card holders.

The Senators’ new tactic resembles the move Durbin made in 2011 to attach a bill aimed at controlling debit card acceptance costs to the massive Dodd-Frank Act, legislation drafted at least in part to address the problems created by the financial crisis that emerged in 2008. Like the current credit card proposal, what became known as the Durbin Amendment requires a choice of networks for merchants.

Critics of the new credit card legislation credit Durbin with following a clever strategy that could succeed if enough legislators agree the defense act should be amended and enacted. “Durbin is crafty and relentless,” says payments consultant Eric Grover, proprietor of the Minden, Nev.-based consultancy Intrepid Ventures. “He hopes to repeat the tactic he successfully employed with his eponymous Durbin Amendment and Dodd-Frank, by trying to attach his credit-card-network-routing mandate to bigger must-pass legislation.”