April 22, 2011

Impending regulation on debit interchange fees -- the so-called Durbin Amendment packed into the Dodd-Frank Wall Street Reform and Consumer Protection Act -- is shaping up to be this summer's blockbuster battle royale between the big bank powers that be and Illinois Sen. Dick Durbin.

JPMorgan Chase CEO Jamie Dimon has outspoken in his criticism against the Durbin Amendment. Chase Bank pulled its debit rewards programs out from under its customers in anticipation of lost fees. Other banks are following suit. The Durbin Amendment doesn't actually go into effect until July 21.

In an open letter to Dimon regarding interchange fees, Durbin essentially calls out the Chase CEO by responding to five specific points of criticism leveled at the law, including:

  • Claims the amendment is baseless, and is built on little fact or analysis
  • The notion that the Durbin Amendment is government-sponsored price fixing
  • Accusations that lost debit fees will result in less funding to fight fraud
  • Lost fees will hurt the bank's ability to service cards and accounts, distribute cards and statements to customers, and generally provide customer service
  • That the new regulation is anti-consumer
  • Durbin also suggests that the fees are aimed not at the banks, but the unregulated debit interchange fee fixing done on behalf of banks by Visa and Mastercard. He offers technology -- such as chip and pin -- as a means to counter fraud, and generally says the regulation will force transparency and efficiency on the debit interchange system.

    Durbin also says customers are the last group who should be punished for the way banks do business.

    "There is no need for you to threaten your customers with higher fees when you and your bank are already making money hand-over-fist. And there is no need to make such threats in response to reform that simply tries to spare consumers from bearing the cost of interchange fees that are anticompetitive and unreasonably high."

    Sen. Durbin probably won't be making an appearance at Dimon's Easter dinner, either.

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