By J. Taylor Rushing and Silla Brush - 05/27/10 11:23 PM EDT
Senate Majority Whip Dick Durbin (D-Ill.) on Thursday sent a terse letter to Visa and MasterCard, asking them to stop “threatening” small banks and credit unions by “distorting” his legislation cracking down on swipe fees.
Writing separately to Visa Inc. Chairman and CEO Joseph Saunders and MasterCard Worldwide CEO Robert Selander, Durbin accused the card giants of trying to intimidate small financial firms into opposing the amendment by warning them of changes to fee rates and operating rules. If the companies don’t stop, 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 requested a reply by June 14.
The Senate passed Durbin’s legislation as part of Congress’s effort to revamp Wall Street overhaul regulations. The amendment, which was approved on a bipartisan 64-33 vote, requires the Federal Reserve to come up with rules that set “reasonable and proportional” fees that flow from merchants to debit card issuers, such as banks and credit unions. The amendment was a major win for merchant and retail lobbying groups.
Fred Becker, president of the National Association of Federal Credit Unions (NAFCU), said credit unions are not threatened by the card network companies.
“We have not been threatened by either MasterCard or Visa and are not aware of any threats to our members individually or to the credit union industry as a whole,” Becker said.
Jason Kratovil, vice president at the Independent Community Bankers of America (ICBA), said, “Community banks don’t need Visa or MasterCard to help them recognize the harm this amendment will cause to their institutions and their customers.”
MasterCard said the Durbin amendment would hurt small banks, credit unions and the broader way the card system operates.
“MasterCard appreciates that Sen. Durbin acknowledges that community banks and credit unions oppose his amendment,” a MasterCard spokesman said in a statement on Thursday. “This opposition appears to be based on community banks’ and credit unions’ recognition that the Durbin amendment would turn the economics of the entire payment system on its head with negative consequences for all participants, including consumers. Such a result is readily apparent to anyone with knowledge of how the industry works.”
Visa did not respond to a request for comment.