Wednesday, May 9, 2012

Never a Dull Moment in Durbinville

Last month I wrote about the recent comings and goings with the Durbin Amendment and interchange. I obviously did not consult with the Federal Reserve Board about timing. On May 2, the Fed did a little Durbin data dump from the fourth quarter of 2011 regarding the effects of the Durbin amendment on exempt and non-exempt issuers.

I have been working Google over-time reading through the various news reports and analyses of the Fed’s numbers. The most prominent concern with the Durbin Amendment was its possible impact on exempt issuers (those lower than $10 billion in asset size). Would merchants incentivize their customers to pay with debit cards from non-exempt issuers thus realizing the lower interchange rate? Could they? The Fed did not answer these questions. The Fed was quite clear that exempt issuers averaged 43 cents in interchange fees (the same number as reported in 2009). The general chorus of those opining about the Fed report was “…it’s too early to tell.” True. We may not even have good trend data for a year or so since the non-exclusivity provision of Durbin took effect at the start of the second quarter this year.

The Fed will continue to collect and publish this data annually. We can also expect a similar report from the Federal Trade Commission by year’s end on the impact to exempt issuers thanks to provision Senator Durbin added in last year’s Omnibus appropriations bill. It’s certainly not a bad thing that the Fed is building trend data on this issue.

The other Durbinville news of the week came from Visa’s quarterly earning call. Visa disclosed a “civil investigative demand” from the Department of Justice regarding its new fixed fee it is now charging merchant banks. We’ll have to see how this one plays out.

I certainly will pass along any more Durbin musings on interchange as they come along.

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