Durbin Redux

U.S. Sen. Richard Durbin, D-Ill., is familiar to Digital Transactions readers as the author of the celebrated (or infamous, depending on your point of view) Durbin Amendment to the 2010 Dodd-Frank Act. That little cherry on top of the Dodd-Frank sundae put a cap on how much interchange big banks can earn on debit card transactions.

It was a signal legislative achievement, in that it marked the first time merchant interests prevailed in an interchange battle with banks. It was also ill-advised, as all such price controls are. But that ship has sailed.

Durbin, however, has remained very much interested in the payments business, and specifically in the vexed national rollout of the EMV chip card standard. Acting again from the merchant perspective, the senator wrote a letter to EMVCo in March to express concern that the standards body, which oversees EMV, is controlled by six big global card networks, with no representation for interests such as retailers or consumers. To underscore his concern, he attached a number of questions probing how EMVCo is run, and asked for a response within 30 days.

Meanwhile, the EMV rollout clanked along, with snarled certification queues for developers, nasty piles of chargebacks for merchants, and snail’s-pace transactions for befuddled consumers.

These problems widened the opening for Durbin, who in April received a polite response from EMVCo. Dissatisfied, he fired off another letter to the organization last month. This second letter makes it plain that, in Durbin’s reading, the networks that control EMVCo are responsible for the mess the rollout has become. The organization is simply pushing the network agenda at the expense of consumers and especially of small merchants. Had these constituencies had a seat at the EMVCo table, things would have gone much more smoothly.

Perhaps Durbin’s darkest suspicion, as expressed in the letter, is that EMVCo is staying mute on the question of PINs for cardholder authentication to suit the networks, which, he intimates, have a financial stake in signature verification.

Again, Durbin demanded an answer within 30 days, a deadline that may well have passed by the time you read this. To underscore his point, he copied the Justice Department and the Federal Trade Commission (to which he had sent a separate letter asking the regulator to sort out the certification issues).

Now, we stipulate, along with many others, that the U.S. EMV rollout could have been better handled. But we doubt that things will get much better with the ministrations of the U.S. Senate, much less the FTC. The question why this wholly private-sector topic should invoke Durbin’s intervention is yet another matter, but we’ll leave that one to wiser heads.

—John Stewart, Editor  |  john@digitaltransactions.net