With a financial system as sophisticated, complicated and interconnected as ours, it shouldn’t come as any surprise that there are no easy fixes. We didn’t need anyone to tell us that the interchange amendment was a bad idea. We’ve opposed it since it first surfaced. Even with a well-intentioned exemption for banks with less than $10 billion in assets, the amendment will harm community banks and our customers, stifle competition, and lead us down the thorny path of government price fixing and controls. I think everyone agrees there is no place for that in a free market society.
As the unintended consequences of the interchange amendment begin to sink in across the country, suddenly there’s an upsurge of groups—from the hip to the hapless, from the overleveraged to the underbanked, both public and private—that are joining ICBA in opposition to the interchange amendment. State treasurers and state benefits administrators from 15 states are telling Congress that the amendment would undermine the government’s push to go paperless by providing benefits through the use of debit or prepaid cards.
“Quite simply, the financial institutions that issue these prepaid debit cards do so at little or no cost to states because they are able to rely on interchange to cover their costs,” 10 state treasurers wrote in a letter to Congress. “If the Durbin amendment becomes law, this will no longer be the case and we are seriously concerned about the viability of these programs. Even if these programs continue, we are concerned that financial institutions will be forced to raise fees on cardholders or States to recoup lost revenue.”
Russell Simmons, hip hop promoter and co-founder of Def Jam, has told Congress the amendment would eliminate a system that benefits the poor. And now there’s a white paper by a George Mason professor that points out the problems of government interventions.
The chorus grows louder every day, and what that chorus is saying is: “If it ain’t broke, don’t fix it.”
(An even better way to advise your representative is through our Interchange Amendment Action Alert)