Durbin Statement on TCF's Court Challenge of Interchange Law

Press Release

Assistant Senate Majority Leader Dick Durbin (D-IL) released the following statement today after Minnesota-based TCF National Bank filed a lawsuit challenging the constitutionality of a Durbin-authored law regarding interchange fees. The bipartisan language passed as part of the Wall Street reform act, requires the Federal Reserve to determine if the current interchange fee structure is both "reasonable and proportional" to the real cost of processing a debit card transaction and allows small businesses to offer discounts to consumers when they use cash, checks or debit cards.

"TCF's complaint not only fundamentally misunderstands the law regarding interchange fees, but it also ignores the facts," Durbin said. "The law in no way addresses the fees TCF, or any other bank, can charge and it does not set interchange rates. Our language simply ensures that debit interchange fees charged to retailers by the card networks -- not the banks -- are "reasonable and proportional' to the cost of processing transactions and provides competition in an area of the market where there's none.

Congress approved this language by a wide bipartisan margin in reaction to the frustrations of millions of merchants and consumers who were getting nickled and dimed by the anticompetitive interchange system set up by big banks and credit card companies -- including TCF. I look forward to this provision's day in court and am confident that our language will be found to be fair and Constitutional."

The Durbin amendment was passed by the Senate 64-33 in May of this year during the Senate's consideration of the Wall Street reform bill. The amendment was agreed to after Congress held six hearings on the issue of interchange fees and their effect on consumers. A modified version of the Durbin amendment was later agreed to by House and Senate negotiators and included in the final bill.

Last week, the Department of Justice (DOJ) concluded a multiple year investigation into the issuance of interchange fees by credit card giants Visa and MasterCard and concluded that the rules surrounding interchange fees exclude competition and are unfair to consumers and merchants alike. DOJ, Visa and MasterCard reached a settlement that would require the two companies to allow merchants to offer discounts, incentives, and information to consumers to encourage the use of payment methods that are less costly. Durbin's statement on the settlement can be found here: http://durbin.senate.gov/showRelease.cfm?releaseId=328137

Interchange fees are supposedly charged by Visa and MasterCard in order to cover the cost of processing a credit or debit card transaction. These fees continue to rise even though processing costs have decreased. Nearly $50 billion in interchange fees were charged by credit and debit card networks in 2008 -- coming out of the bottom lines of small businesses, charities and government balance sheets. Of these fees, 80 percent went to just ten large banks.

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