Dear Senator,

On behalf of more than 1.7 million Americans for Prosperity activists in all 50 states, I urge you to support the bipartisan effort led by Senator Tester to delay price controls on debit card interchange fees. His legislation would delay these rules, currently scheduled to take effect on July 21, for two years while officials study the rule and sort out concerns voiced across the political spectrum.

I urge you to vote Yes on Senator Tester’s legislation to delay price controls on debit card interchange fees. AFP will be rating this vote in our congressional ratings.

The so-called Durbin Amendment, added at the eleventh hour to the drastic Dodd-Frank financial regulatory overhaul, caps the fees issuers can charge to process debit card transactions. The proposed caps would fall well below current rates: the current average fee, determined in the free market, is about 44 cents per transaction; the Fed proposed a 12-cent cap, an arbitrary 73% reduction.

Current features that bank customers find highly desirable – such as free checking, free debit cards, rewards programs, and robust fraud protection – may be phased out because banks will no longer be able to afford to provide them. And while the law attempts to exempt small and community banks from the price caps, there is no way this exemption can be effective in practice. Cutting into this important funding source for small banks would put them at a severe disadvantage compared to large banks and could cause some of them to fail, as Fed Chairman Ben Bernanke recently acknowledged.

There is no evidence that the rule will even achieve its stated purpose of lowering prices for consumers. A 2009 GAO study of similar interchange fee caps implemented in Australia found a billion-dollar payday for Australian merchants, but no evidence that the merchants passed along the savings to consumers in the form of lower prices. However, the study did find that cardholders’ benefits were slashed because of the price controls. While delaying implementation of these rules is a good first step, AFP believes it is vitally important for the Senate to repeal of these price controls.

I urge you to vote Yes on Senator Tester’s legislation to delay price controls on debit card interchange fees. AFP will be rating this vote in our congressional ratings.

Sincerely,

James Valvo
Director of Government Affairs – Americans for Prosperity

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