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Op-ed: Durbin-Marshall Credit Card Plan Would Hurt Local Banks, Consumers

August 23, 2022

Legislation in Congress giving merchants broad say over which credit card routing networks they use puts consumers’ financial information at risk and could spell the end of popular rewards programs, Julie Huber, EVP of Equity Bank in Wichita and regional representative of the Kansas Bankers Association board, wrote in a recent op-ed for The Wichita Eagle.

Senate Bill 4674, introduced by Sens. Roger Marshall (R-Kan.) and Dick Durbin (D-Ill.), would mandate that merchants can choose how card transactions are routed so that they can choose a cheaper payment rail, but cheaper isn’t necessarily better, Huber said. There is a cost for maintaining secure networks, and the cheaper alternatives may not be able to support rewards programs. “Just imagine that you use your credit card to make a purchase, thinking that you will be receiving points, only to find out that the store where you bought the item diverted your purchase to a different routing rail and so no points were awarded to you,” she wrote.

Huber noted that Durbin previously led a successful charge to force banks and credit unions to offer at least two routing networks for debit card transactions, to deleterious effect. “It made checking accounts and debit cards more expensive for your local bank to offer and it virtually eliminated debit card rewards for consumers,” she wrote. “The Federal Reserve’s own economists did a study following implementation of the original Durbin mandate and found that only 1% of merchants lowered prices for consumers, in contrast to 22% of merchants that raised prices.”

“As a 30-year community banker, I firmly believe history will repeat itself if the Marshall-Durbin legislation is adopted and applied to credit card transactions,” Huber wrote. Read the op-ed. (Subscription may be required.)

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