Durbin tells large credit companies to back off

Senate Majority Whip Dick Durbin (D-Ill.) sent a terse letter to officials at Visa and MasterCard Thursday, asking them to halt "threatening" small banks and credit unions and "distorting" an amendment Durbin recently passed to crack down on swipe fees.

In separate letters to Visa Inc. Chairman and CEO Joseph Saunders and MasterCard Worldwide CEO Robert Selander, Durbin accused the credit card giants of trying to intimidate smaller financial firms into opposing the amendment by warning them of changes to fee rates and operating rules. If the companies do not cease, Durbin said they could be investigated.

"The simple fact is that small banks would not be harmed or punished under the amendment unless your companies decide to harm or punish them," Durbin wrote. "Further, I warn you that if your companies coordinate with each other or collude with your largest member banks to make changes to your fees and rules, it would raise serious concerns that you are engaging in an unlawful restraint of trade."

Durbin's amendment actually may hurt consumers and small financial institutions, Fred Becker, the head of the National Association of Federal Credit Unions, said in a release today. 

"Our independent analysis indicates that when placed into practice, the interchange provision will do nothing but add to the bottom lines of big-box stores and giant retailers — all at the expense of consumers and small financial institutions," Becker said. 

He said he wasn't aware of any threats made by MasterCard or Visa to his organization or its members. 

Durbin asks for a reply to the letter by June 14. 

The Senate passed Durbin's amendment May 13 with a 64-33 vote. It grants retailers more control over the so-called "swipe fees" they must pay the credit card industry each time a customer uses a debit or credit card.

Updated at 6:15 p.m.