By Buddy Gill
“Durbin Amendment Repeal is Officially Dead; Time to Move On”
That headline isn’t going to be popular with credit unions, but it’s the truth.
A provision to repeal the 2010 Durbin amendment that led to government-fixed prices on interchange rates was dropped from the 2017 CHOICE Act in the House of Representatives before it could go to the House floor.
Rightful kudos go to House Financial Services Chairman Jeb Hensarling for including the repeal provision in the 2017 CHOICE Act, and for fearlessly pushing it through his committee over fierce retailer objections.
But the wise Chairman, along with Republican House Leadership counting votes, knew this provision was a lightning rod whose inclusion would jeopardize the chances of his overall bill passing the full House.
Similarly, a previous “déjà vu” Durbin repeal attempt made several years back in the U.S. Senate got 55 votes, but failed to reach the 60 vote threshold required to advance the bill to a final Senate floor vote.
Give both credit union and bank trade lobbies due credit for getting to a Senate 55 vote majority back then, despite vehement opposition from the gigantic retailer lobby. Unfortunately, that still wasn’t enough to produce a Senate floor vote. In 2017, House Republican leaders also knew the votes weren’t there in the Senate for a different outcome a second time around.
Why Did We Lose?
Bank and credit union trade associations have expended their political capital for years pushing for Durbin repeal on Capitol Hill. Most Democrats, usually sympathetic to pro-credit union issues, nonetheless support the Durbin amendment, as do pro-consumer groups like the Consumer Federation of America.
Combine that with the reality that Republicans were not monolithic supporters of repealing Durbin. Republicans favoring repeal felt that the free-market, not government, should set prices, yet other Republican congressional lawmakers were inundated by the retailers in their district and told that changing the status quo would raise costs significantly to these businesses and consumers alike. It was a divisive issue within the Republican caucus–one where lawmakers would have to choose between good friends.
Credit unions should understand that political conundrum. When I managed the winning HR 1151 Campaign for Consumer Choice back in 1998, an often-overlooked secret for the credit union victory over the banks on Capitol Hill was our great success in recruiting third party allies, usually in the form of local Select Employee Groups (SEGs) to advocate our cause alongside us. Getting those hundreds of SEG voices in each congressional district to support us helped isolate the banks into a political corner, and make it much easier for Congress to tell all our collective voices “yes” -- and say “no” to the banks.
Flash forward to this 2017 legislative battle. Just imagine in your local Congressman’s office, s/he has bank and credit union CEOs and affiliated trade groups arguing to repeal the Durbin amendment, but then contrast that handful of in-person voices to hundreds of small to large business owners and CEOs arguing against repeal. Politically, in this fight credit unions were outnumbered unless they could get some of their 100-million members to roar, but many of these members also worked at business SEGs that disagree with repealing Durbin.
Frankly, the public did not seem to care about this fight, perhaps because it is a very technical and complex policy issue to explain to your average citizen enjoying McDonalds for lunch. So, this was mainly viewed on Capitol Hill as a purely fight between industry titans over money.
What’s Next?
No doubt the credit union and bank trades will posture to say “we’re not giving up, we’ll be back.” But anyone who can read political tea leaves knows legislative repeal is simply not politically feasible – the votes to repeal Durbin simply aren’t there.
Even the combined efforts of credit unions and banks, as mighty as that can be on Capitol Hill, were not politically powerful enough to beat back the bigger “Goliath” of America’s large and small businesses who accept credit and debit cards.
So, the real question is: does the credit union movement want to keep spending political capital on a legislative issue it simply can’t win? Or re-focus its efforts and capital on where it can feasibly achieve victories to help credit unions and their members succeed?
Could credit unions and banks use this defeat to “guilt” Congress into instead passing stronger data security measures and breach disclosures for retailers, as cyber-attacks on our financial system are now increasingly more and more a national security concern? Or will that just produce a déjà vu repeat of the above political dynamic?
What about instead focusing credit union energy like a laser on current efforts to produce regulatory relief?
Time will tell. But success depends on seeing reality as it, and not as you want it to be.
Buddy Gill is a long-time credit union movement consultant and former Senior Advisor to two NCUA Chairmen. He can be reached at buddygill@mac.com.