Retailer Groups Celebrate as House Republicans Appear to Ditch Durbin Repeal Effort

Two major retailer trade groups late Wednesday celebrated an apparent decision by Republican leaders in the House of Representatives to quash a provision that would have repealed the Durbin Amendment. The provision was part of the Financial Choice Act, a bill Congressional Republicans are pushing to overhaul the 2010 Dodd-Frank Act.

The effort to repeal the amendment, which caps the interchange big issuers can collect on debit card transactions and requires all issuers to use at least two unrelated networks for debit routing, failed as House Republicans couldn’t muster enough support for it as part of the larger bill, the National Retail Federation said in a press release. The House will proceed with a vote on the bill when it reconvenes after the Memorial Day holiday, the NRF said.

Wednesday’s action came just three weeks after the House Financial Services Committee had voted 34-26 in favor of the Choice Act, including the Durbin repeal provision.

Despite Wednesday’s setback, the Electronic Payments Coalition, a Washington, D.C.-based trade group that represents networks and financial institutions, said it will continue to fight for repeal. “[House] members know [the Durbin Amendment] is a crony handout that has generated unearned billions for the Big Box retailers and heartburn for their customers,” said Molly Wilkinson, executive director of the EPC, in a statement. “The Durbin price controls hurt consumers, community banks, and credit unions and even small merchants. This is a bad policy, and we, the Electronic Payments Coalition, are committed to repealing it.”

The Durbin restrictions, originally proposed by Sen. Richard Durbin, D-Ill., make up an amendment to Dodd-Frank. The amendment is bitterly opposed by the major card networks and some banks, but supported by merchants that see the law, which they refer to as swipe-fee reform, as having saved billions in acceptance costs. The EPC has estimated the amendment has cost issuers more than $42 billion to date. Critics of the amendment, however, have questioned how much of the savings merchants have passed on to consumers.

Merchant groups like the Washington, D.C.-based NRF and the Retail Industry Leaders Association, based in nearby Arlington, Va., were in a celebratory mood Wednesday night. “Preservation of swipe-fee reform is an important victory for retailers and consumers who would have faced higher fees from the country’s largest banks with every swipe of a debit card,” said Austen Jensen, vice president of government affairs and financial services at RILA, in a statement.

“Repeal of reform would have allowed banks to return to the uncompetitive market that that allowed them to set these fees as high as they liked,” said Mallory Duncan, senior vice president and general counsel for the NRF, in a statement. “The progress that was made toward competition would have been lost, and consumers would have seen nothing but higher prices.”

To help sink the anti-Durbin effort, the NRF recently launched a multimedia advertising campaign targeting the districts of Congressmen who supported repeal. But Duncan vows the NRF will guard against any effort to re-introduce the repeal provision later. “Despite tonight’s good news, we will continue to follow this bill to the end and ensure that repeal is not included in the final legislation,” he said.

The Durbin Amendment’s interchange limits took effect in 2011 and apply to institutions with more than $10 billion in assets. This was followed by the routing requirements in 2012. Specific limits have been set by the Federal Reserve Board, and stand at about 22 cents per transaction, or roughly half the average before reform. Merchant groups, however, have criticized the Fed for setting the caps at higher levels than were intended by the law.

In opposing the law’s provisions, the EPC has decried what it sees as their arbitrary price controls and has argued merchants have not passed on interchange savings to consumers, even though this was one of the arguments merchants made in favor of the Durbin Amendment when it was first proposed.