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SRM Perspectives on Key Industry Trends

Myron Schwarcz and Keith Ash

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Durbin Bill Aims to Fundamentally Change the Credit Market, Causing Disaster for Industry

Posted by Myron Schwarcz and Keith Ash on Sep 7, 2022 11:16:00 AM

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Ever since the Durbin Amendment upended the debit card industry in 2010, insiders have speculated that Sen. Richard Durbin (D-Ill.) would eventually pursue similar changes to the credit card industry.

Sen. Durbin made it known during a May 2022 Senate Judiciary Committee meeting that credit card reform was in his crosshairs. As inflation rose, he found a bipartisan partner in Sen. Roger Marshal (R-Kan.) and introduced bill S.4674, the Credit Card Competition Action of 2022.

This bill reflects many principles Reg II applied to routing, intending to increase competition and reduce merchant costs. If this bill becomes law, it will have significant consequences for issuers and consumers, potentially completely upending credit access as we know it today. It could also lead some issuers to dial back rewards and benefits.

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Topics: Durbin Amendment, Interchange, Fee Income, Credit Cards

Durbin 2.0: Creating Clarity or Confusion?

Posted by Myron Schwarcz and Keith Ash on Aug 17, 2021 9:30:00 AM

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Rumor is that a further tightening of the Durbin Amendment is on the near-term horizon for card issuers. The most concrete evidence is the Fed’s May request-for-comment on regulations for debit routing of online transactions.

The Fed wants to clarify the regulatory requirement that at least two unaffiliated payment card networks must be enabled for all debit card transactions, including card-not-present (CNP), and card-issuing banks and credit unions will be held responsible. Some terminology will also see standardization.

While the Fed positioned its query as a “non-substantive clarification,” many of the 453 comments submitted so far express a belief that the proposal, if enacted, would have a significant impact on issuers. Meanwhile, bankers are entering a period of uncertainty as they closely monitor the situation for implications to P&L.

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Topics: Payments, Vendor Contract Negotiation, Durbin Amendment, Regulations

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